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Here’s why Element Fleet Management (TSE:EFN) caught the attention of investors

It is common for many investors, especially those who are inexperienced, to buy shares in companies that have a good history, even if those companies are loss-making. Unfortunately, these high-risk investments are often unlikely to ever return, and many investors pay a price to learn their lesson. Although a well-funded business may suffer losses for years, it will eventually have to turn a profit or investors will move on and the business will wither away.

Despite being in the era of astronomical investing in tech stocks, many investors still adopt a more traditional strategy; buy shares in profitable companies like Element fleet management (TSE:EFN). This does not mean that the company presents the best investment opportunity, but profitability is a key element of business success.

Check out our latest analysis for Element Fleet Management

Improved Element Fleet Management benefits

Element Fleet Management has seen massive growth in earnings per share over the past three years. So much so that this three-year growth rate would not be a fair assessment of the company’s future. Accordingly, we will instead zoom in on last year’s growth. Element Fleet Management’s EPS grew from CA$0.60 to CA$0.81 in just one year; a result that is sure to make shareholders smile. That’s an impressive gain of 34%.

Revenue growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and tax (EBIT) margin, it’s a great way for a business to maintain a competitive advantage in the market. It should be noted that revenues from Element Fleet Management operations was lower than its turnover for the last twelve months, which could distort our analysis of its margins. Element Fleet Management’s EBIT margins have remained virtually unchanged over the past year, but the company should be pleased to report revenue growth for the period of 4.2% to C$1.5 billion. It is progress.

You can check the company’s revenue and profit growth trend in the table below. To see the actual numbers, click on the chart.

TSX: EFN Earnings & Revenue History July 19, 2022

The trick, as an investor, is to find companies that go to perform well in the future, not just in the past. While crystal balls don’t exist, you can check out our visualization of consensus analyst forecasts for Element Fleet Management’s future EPS 100% free.

Are Element Fleet Management insiders aligned with all shareholders?

Investors are always looking for a vote of confidence in the companies they own and insider buying is one of the main indicators of optimism in the market. This view is based on the possibility that stock purchases signal an uptrend on behalf of the buyer. However, insiders are sometimes wrong and we don’t know the exact logic behind their acquisitions.

We haven’t seen any insiders sell Element Fleet Management stock in the past year. So it’s really nice that EVP and CFO Frank Ruperto bought C$61,000 worth of stock at an average price of around C$12.12. Buys like this can help investors understand the management team’s views; in which case they see some potential in Element Fleet Management.

Is Element Fleet Management Worth Watching?

If you think stock price tracks earnings per share, you should definitely dig into Element Fleet Management’s strong EPS growth. EPS growth isn’t the only striking feature, with company insiders adding to their holdings in another remarkable vote of confidence for the company. So on that analysis, Element Fleet Management is probably worth spending some time on. What about the risks? Every business has them, and we’ve spotted 2 warning signs for Element Fleet Management you should know.

There are many other companies whose insiders buy shares. So if you like the sound of Element Fleet Management, you’ll probably love this one free list of growing companies insiders are buying.

Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.