Yahoo Finance If EPS Growth Is Important To You, Savaria (TSE:SIS) Presents An Opportunity
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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 Savaria (TSE:SIS). 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.
Check out our latest analysis for Savaria
How Quickly Is Savaria Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Savaria has grown EPS by 8.1% per year. That's a good rate of growth, if it can be sustained.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Savaria remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 2.2% to CA$835m. That's encouraging news for the company!
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.
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 Savaria?
Are Savaria 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. 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.
It's pleasing to note that insiders spent CA$6.6m buying Savaria shares, over the last year, without reporting any share sales whatsoever. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. It is also worth noting that it was Executive Chairman Marcel Bourassa who made the biggest single purchase, worth CA$2.0m, paying CA$14.50 per share.
On top of the insider buying, it's good to see that Savaria insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at CA$247m. This totals to 20% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. The cherry on top is that the CEO, Sebastien Bourassa is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Savaria with market caps between CA$546m and CA$2.2b is about CA$2.5m.
The Savaria CEO received total compensation of just CA$454k in the year to December 2023. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is Savaria Worth Keeping An Eye On?
One important encouraging feature of Savaria is that it is growing profits. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. It is worth noting though that we have found 1 warning sign for Savaria that you need to take into consideration.
Keen growth investors love to see insider activity. Thankfully, Savaria isn't the only one. You can see a a curated list of Canadian companies which have exhibited consistent growth accompanied by high insider ownership.
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.
