Should You Be Adding Adcorp Holdings (JSE:ADR) To Your Watchlist Today?
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 Adcorp Holdings (JSE:ADR). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for Adcorp Holdings
How Fast Is Adcorp Holdings Growing Its Earnings Per Share?
In the last three years Adcorp Holdings' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Adcorp Holdings boosted its trailing twelve month EPS from R0.96 to R1.15, in the last year. That's a 19% gain; respectable growth in the broader scheme of things.
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 Adcorp Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.5% to R12b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Adcorp Holdings isn't a huge company, given its market capitalisation of R672m. That makes it extra important to check on its balance sheet strength.
Are Adcorp Holdings Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We haven't seen any insiders selling Adcorp Holdings shares, in the last year. So it's definitely nice that CEO & Executive Director John Wentzel bought R119k worth of shares at an average price of around R5.67. It seems that at least one insider is prepared to show the market there is potential within Adcorp Holdings.
Is Adcorp Holdings Worth Keeping An Eye On?
One important encouraging feature of Adcorp Holdings is that it is growing profits. While some companies are struggling to grow EPS, Adcorp Holdings seems free from that morose affliction. Despite there being a solitary insider adding to their holdings, it's enough to consider adding this to the watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Adcorp Holdings , and understanding these should be part of your investment process.
Keen growth investors love to see insider buying. Thankfully, Adcorp Holdings isn't the only one. You can see a a free list of them here.
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.
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