With EPS Growth And More, Infratil (NZSE:IFT) Makes An Interesting Case

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Infratil (NZSE:IFT), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Infratil with the means to add long-term value to shareholders.

See our latest analysis for Infratil

How Fast Is Infratil Growing Its Earnings Per Share?

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that Infratil's EPS went from NZ$0.06 to NZ$0.38 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Infratil's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. The good news is that Infratil is growing revenues, and EBIT margins improved by 21.9 percentage points to 38%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Infratil's forecast profits?

Are Infratil Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news is that Infratil insiders spent a whopping NZ$4.3m on stock in just one year, without so much as a single sale. Knowing this, Infratil will have have all eyes on them in anticipation for the what could happen in the near future. We also note that it was the Independent Director, Andrew Clark, who made the biggest single acquisition, paying NZ$1.5m for shares at about NZ$9.86 each.

The good news, alongside the insider buying, for Infratil bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enviable stake in the company, worth NZ$171m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Does Infratil Deserve A Spot On Your Watchlist?

Infratil's earnings have taken off in quite an impressive fashion. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Infratil deserves timely attention. We don't want to rain on the parade too much, but we did also find 2 warning signs for Infratil (1 can't be ignored!) that you need to be mindful of.

Keen growth investors love to see insider buying. Thankfully, Infratil isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.