We Ran A Stock Scan For Earnings Growth And TruFin (LON:TRU) Passed With Ease
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
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 TruFin (LON:TRU). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide TruFin with the means to add long-term value to shareholders.
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It’s an outstanding feat for TruFin to have grown EPS from UK£0.024 to UK£0.074 in just one year. While it’s difficult to sustain growth at that level, it bodes well for the company’s outlook for the future. 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. Our analysis has highlighted that TruFin’s revenue from operations did not account for all of their revenue last year, so our analysis of its margins might not accurately reflect the underlying business. TruFin shareholders can take confidence from the fact that EBIT margins are up from 40% to 64%, and revenue is growing. Both of which are great metrics to check off for potential growth.
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.
View our latest analysis for TruFin
Since TruFin is no giant, with a market capitalisation of UK£109m, you should definitely check its cash and debt before getting too excited about its prospects.
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. 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.
