Some have more money than sense, they say, so even companies with no revenue, no profit and a history of failures can easily find investors. But as Warren Buffett said, “If you’ve been playing poker for half an hour and you still don’t know who the sucker is, you’re the sucker.” When buying such stocks, investors are too often suckers.
In the era of blue-sky tech-stock investments, my choice may seem old-fashioned; I always prefer profitable companies like Computer graphics (TSE: GIB.A). Even if stocks are fully valued today, most capitalists would recognize its earnings as a demonstration of consistent value generation. While a well-funded business may suffer losses for years, unless its owners have an endless appetite to subsidize the customer, it will eventually have to turn a profit, or else breathe its last breath.
See our latest analysis for CGI
How fast is CGI growing?
As one of my mentors once told me, stock price follows earnings per share (EPS). This makes EPS growth an attractive quality for any business. We can see that over the past three years, CGI has grown its EPS by 11% per year. That’s a pretty good rate, if the company can maintain it.
I like to see revenue growth as an indication that growth is sustainable, and I look for a high margin on earnings before interest and taxes (EBIT) to point to a competitive moat (although some low-margin companies also have moats). CGI has maintained stable EBIT margins over the past year, while growing revenues by 2.6% to C$12 billion. This is a real plus point.
In the table below, you can see how the company has increased its profits and revenue over time. To see the actual numbers, click on the chart.
In investing, as in life, the future matters more than the past. So why not check this out free interactive CGI visualization provide profits?
Are CGI insiders aligned with all shareholders?
We wouldn’t expect to see insiders owning a significant percentage of a C$25 billion company like CGI. But we are reassured by the fact that they have invested in the company. Notably, they have a huge stake in the company, worth C$3.0 billion. This suggests to me that management will be very mindful of shareholder interests when making decisions!
Should you add CGI to your watch list?
A positive for CGI is that it increases the EPS. It’s nice to see. If that’s not enough on its own, there are also the fairly notable levels of insider ownership. The combination sparks joy for me, so I would consider keeping the company on a watch list. If you think CGI might suit your style of investing, you can jump straight to its annual report, or you can first check out our discounted cash flow (DCF) assessment for the company.
While CGI looks good to me, I’d rather have insiders buying stocks. If you also like to see insiders buy, then this free list of growing companies that insiders are buying might be exactly what you’re looking for.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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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.