Is Now The Time To Put Implenia (VTX:IMPN) On Your Watchlist? #CanadaFinance

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

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 Implenia (VTX:IMPN). 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.

View our latest analysis for Implenia

In the last three years Implenia’s earnings per share took off; so much so that it’s a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we’ll zoom in on growth over the last year, instead. In impressive fashion, Implenia’s EPS grew from CHF4.01 to CHF7.33, over the previous 12 months. It’s a rarity to see 83% year-on-year growth like that.

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. Implenia maintained stable EBIT margins over the last year, all while growing revenue 3.6% to CHF3.6b. That’s progress.

The chart below shows how the company’s bottom and top lines have progressed over time. For finer detail, click on the image.

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 Implenia.

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Implenia insiders have a significant amount of capital invested in the stock. With a whopping CHF51m worth of shares as a group, insiders have plenty riding on the company’s success. That’s certainly enough to let shareholders know that management will be very focussed on long term growth.

Implenia’s earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there’s a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Implenia very closely. You should always think about risks though. Case in point, we’ve spotted 2 warning signs for Implenia you should be aware of, and 1 of them doesn’t sit too well with us.

Story Continues