I Built A List Of Growing Companies And AfroCentric Investment (JSE:ACT) Made The Cut

By
Simply Wall St
Published
June 03, 2021
JSE:ACT
Source: Shutterstock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like AfroCentric Investment (JSE:ACT). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for AfroCentric Investment

How Quickly Is AfroCentric Investment Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that AfroCentric Investment has managed to grow EPS by 31% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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. AfroCentric Investment maintained stable EBIT margins over the last year, all while growing revenue 19% to R7.2b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
JSE:ACT Earnings and Revenue History June 4th 2021

AfroCentric Investment isn't a huge company, given its market capitalization of R2.6b. That makes it extra important to check on its balance sheet strength.

Are AfroCentric Investment Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own AfroCentric Investment shares worth a considerable sum. Indeed, they hold R186m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 7.1% of the company, demonstrating a degree of high-level alignment with shareholders.

Does AfroCentric Investment Deserve A Spot On Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about AfroCentric Investment's strong EPS growth. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Now, you could try to make up your mind on AfroCentric Investment by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although AfroCentric Investment certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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

If you're looking for stocks to buy, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted


Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.