The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
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 Manulife Financial (TSE:MFC). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
How Quickly Is Manulife Financial Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Manulife Financial managed to grow EPS by 16% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.
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. It's noted that, last year, Manulife Financial's revenue from operations was lower than its revenue, so that could distort our analysis of its margins. Unfortunately, Manulife Financial's revenue dropped 62% last year, but the silver lining is that EBIT margins improved from 16% to 48%. That falls short of ideal.
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.
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 Manulife Financial?
Are Manulife Financial 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Although we did see some insider selling (worth CA$115k) this was overshadowed by a mountain of buying, totalling CA$1.3m in just one year. This bodes well for Manulife Financial 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 Independent Corporate Director Claude Prieur who made the biggest single purchase, worth CA$1.3m, paying CA$23.26 per share.
The good news, alongside the insider buying, for Manulife Financial bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at CA$29m. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.06%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Should You Add Manulife Financial To Your Watchlist?
One positive for Manulife Financial is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Still, you should learn about the 2 warning signs we've spotted with Manulife Financial (including 1 which is a bit unpleasant).
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Manulife Financial, you'll probably love this free list of growing companies that insiders are buying.
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.
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