Yahoo Finance Here's Why We Think Bank of Montreal (TSE:BMO) Is Well Worth Watching
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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
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 Bank of Montreal (TSE:BMO). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
See our latest analysis for Bank of Montreal
How Quickly Is Bank of Montreal Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Impressively, Bank of Montreal has grown EPS by 23% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. Our analysis has highlighted that Bank of Montreal's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Bank of Montreal achieved similar EBIT margins to last year, revenue grew by a solid 25% to CA$31b. That's encouraging news for the company!
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.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Bank of Montreal?
Are Bank of Montreal 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We haven't seen any insiders selling Bank of Montreal shares, in the last year. So it's definitely nice that Independent Director Madhu Ranganathan bought CA$45k worth of shares at an average price of around CA$137. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.
On top of the insider buying, it's good to see that Bank of Montreal insiders have a valuable investment in the business. Indeed, they hold CA$25m worth of its stock. This considerable investment should help drive long-term value in the business. Even though that's only about 0.03% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Should You Add Bank of Montreal To Your Watchlist?
For growth investors, Bank of Montreal's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. Astute investors will want to keep this stock on watch. You should always think about risks though. Case in point, we've spotted 2 warning signs for Bank of Montreal you should be aware of, and 1 of them is concerning.
The good news is that Bank of Montreal 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
