Advertisement
Australia markets close in 2 hours 47 minutes
  • ALL ORDS

    7,898.70
    -0.50 (-0.01%)
     
  • ASX 200

    7,642.40
    -1.20 (-0.02%)
     
  • AUD/USD

    0.6555
    -0.0008 (-0.12%)
     
  • OIL

    76.18
    -0.31 (-0.41%)
     
  • GOLD

    2,041.30
    -8.10 (-0.40%)
     
  • Bitcoin AUD

    78,555.38
    -450.99 (-0.57%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • AUD/EUR

    0.6059
    -0.0003 (-0.05%)
     
  • AUD/NZD

    1.0624
    +0.0039 (+0.36%)
     
  • NZX 50

    11,705.78
    -14.02 (-0.12%)
     
  • NASDAQ

    17,937.61
    -67.09 (-0.37%)
     
  • FTSE

    7,706.28
    +21.79 (+0.28%)
     
  • Dow Jones

    39,131.53
    +62.43 (+0.16%)
     
  • DAX

    17,419.33
    +48.93 (+0.28%)
     
  • Hang Seng

    16,621.51
    -104.35 (-0.62%)
     
  • NIKKEI 225

    39,313.37
    +214.67 (+0.55%)
     

Here's Why We Think Infratil (NZSE:IFT) 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Infratil (NZSE:IFT). 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.

See our latest analysis for Infratil

Infratil's Improving Profits

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that Infratil grew its EPS from NZ$0.13 to NZ$1.77, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. It's noted that Infratil's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Infratil maintained stable EBIT margins over the last year, all while growing revenue 47% to NZ$2.4b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
earnings-and-revenue-history

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Infratil.

Are Infratil 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's pleasing to note that insiders spent NZ$4.3m buying Infratil 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. Zooming in, we can see that the biggest insider purchase was by Independent Director Andrew Clark for NZ$1.5m worth of shares, at about NZ$9.86 per share.

Along with the insider buying, another encouraging sign for Infratil is that insiders, as a group, have a considerable shareholding. Notably, they have an enviable stake in the company, worth NZ$171m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Should You Add Infratil To Your Watchlist?

Infratil's earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Infratil deserves timely attention. Still, you should learn about the 4 warning signs we've spotted with Infratil (including 2 which shouldn't be ignored).

The good news is that Infratil 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.