Here's Why Elders (ASX:ELD) Has Caught The Eye Of Investors

  • In Business
  • 2022-10-05 23:24:33Z
  • By Simply Wall St.

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Elders (ASX:ELD), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Elders with the means to add long-term value to shareholders.

View our latest analysis for Elders

How Quickly Is Elders Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Elders' EPS has grown 27% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Elders maintained stable EBIT margins over the last year, all while growing revenue 29% to AU$3.0b. That's a real positive.

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.

Fortunately, we've got access to analyst forecasts of Elders' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Elders 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We note that Elders insiders spent AU$104k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic.

The good news, alongside the insider buying, for Elders bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at AU$30m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 1.5%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Should You Add Elders To Your Watchlist?

For growth investors, Elders' raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. Astute investors will want to keep this stock on watch. Still, you should learn about the 2 warning signs we've spotted with Elders (including 1 which can't be ignored).

The good news is that Elders 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)

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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