Should You Be Adding Infratil (NZSE:IFT) To Your Watchlist Today?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Infratil (NZSE:IFT). 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.

Check out our latest analysis for Infratil

Infratil's Improving Profits

Infratil has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Infratil's EPS shot from NZ$0.43 to NZ$0.88, over the last year. It's not often a company can achieve year-on-year growth of 104%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It's noted that Infratil's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. On the one hand, Infratil's EBIT margins fell over the last year, but on the other hand, revenue grew. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Infratil.

Are Infratil Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news is that Infratil insiders spent a whopping NZ$14m 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. Zooming in, we can see that the biggest insider purchase was by company insider Paul Joseph Newfield for NZ$6.1m worth of shares, at about NZ$10.12 per share.

On top of the insider buying, it's good to see that Infratil insiders have a valuable investment in the business. We note that their impressive stake in the company is worth NZ$315m. 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. Even so, be aware that Infratil is showing 3 warning signs in our investment analysis , and 2 of those are significant...

The good news is that Infratil is not the only stock with insider buying. Here's a list of small cap, undervalued companies in NZ with insider buying in the last three months!

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.