Yahoo Finance Here's Why Cenovus Energy (TSE:CVE) Has Caught The Eye Of Investors
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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Cenovus Energy (TSE:CVE). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Cenovus Energy with the means to add long-term value to shareholders.
See our latest analysis for Cenovus Energy
Cenovus Energy's Improving Profits
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It is awe-striking that Cenovus Energy's EPS went from CA$0.45 to CA$2.72 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. 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. Cenovus Energy shareholders can take confidence from the fact that EBIT margins are up from 5.7% to 14%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Cenovus Energy's forecast profits?
Are Cenovus Energy Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We do note that, in the last year, insiders sold CA$2.6m worth of shares. But that's far less than the CA$7.0m insiders spent purchasing stock. This bodes well for Cenovus Energy as it highlights the fact that those who are important to the company having a lot of faith in its future. It is also worth noting that it was Executive VP & COO Jonathan McKenzie who made the biggest single purchase, worth CA$1.3m, paying CA$25.84 per share.
On top of the insider buying, it's good to see that Cenovus Energy insiders have a valuable investment in the business. Given insiders own a significant chunk of shares, currently valued at CA$95m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.
Is Cenovus Energy Worth Keeping An Eye On?
Cenovus Energy's earnings per share have been soaring, with growth rates sky high. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Cenovus Energy deserves timely attention. Even so, be aware that Cenovus Energy is showing 1 warning sign in our investment analysis , you should know about...
The good news is that Cenovus Energy is not the only growth stock with insider buying. Here's a list of them... 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
