Here’s why I think contact energy (NZSE: CEN) is an interesting stock

It is only natural that many investors, especially those who are new to the game, prefer to buy stocks in ‘sexy’ stocks with a good history, even if these companies lose money. And in their study with the title Who is the prey for the wolf from Wall Street? ‘ Leuz et. eel. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.

If, on the other hand, you like companies that have revenue and even make a profit, you may well be interested in Contact energy (NZSE: CEN). Now, I am not saying that the stock is necessarily underestimated today; but I can not shake an appreciation of the profitability of the company itself. In comparison, loss-making companies act as a sponge for capital – but unlike such a sponge, they do not always produce anything when pressed.

See our latest analysis for Contact Energy

Contact Energi’s earnings per. Stocks are growing.

If you believe that the markets are even vaguely efficient, in the long run you would expect a company’s share price to follow its earnings per share. Action (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. As a tree constantly abuts the sky, Contact Energy’s EPS has grown by 21% each year, compounded, over three years. As a general rule, we would say that if a company can keep up to kind of growth, shareholders will smile.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) can help inform a view on the sustainability of recent profits. Contact Energy’s EBIT margins are flat, but for some reason its revenue is actually down. And that makes me a little more careful with the stock.

You can look at the company’s revenue and earnings growth in the chart below. Click on the chart to see the actual numbers.

earnings-and-revenue history

The trick as an investor is to find companies that are goes to perform well in the future, not just in the past. For that purpose, you can check right now and today our visualization of forecasts for consensus analysts for future Contact Energy EPS 100% free.

Are contact energy insiders adapted to all shareholders?

I always like to check on compensation from the CEO because I think reasonable salary levels around or below the median may be a sign that shareholder interests are being considered. For companies with market values ​​between NZ $ 2.8 b and NZ $ 8.9 m, such as Contact Energy, the median CEO salary is around NZ $ 2.0 million.

Contact Energy offered a total compensation worth DKK 1.4 million. NZ to its CEO next year. It seems pretty reasonable, especially since it is below the median of companies of similar size. While the level of CEO compensation is not a major factor in my view of the company, modest remuneration is a positive one because it suggests that the board of directors keeps the interests of shareholders in mind. It can also be a sign of a culture of integrity in a broader sense.

Need to add contact energy to your watchlist?

You can not deny that Contact Energy has increased its earnings per. Stock at a very impressive rate. It’s attractive. With fast-growing earnings, it probably has the best days ahead, and the modest CEO salary suggests the company is cautious about cash. So I would venture, it may very well deserve a place on your watch list or even a little further study. Still be aware of it Contact Energy is displayed 3 warning signs in our investment analysis , and 1 of them can not be ignored …

Of course, you can do well (sometimes) to buy stocks is not growing earnings and refrain have insiders buying stocks. But as a growth investor, I always like to check companies there do has these features. You can access a free list of them here.

Note that the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any shares and does not take into account your goals or your financial situation. We strive to provide you with long-term focused analysis driven by basic data. Please note that our analysis may not include the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in the mentioned stocks.

Do you have feedback on this article? Worried about the content? Contact us with us directly. Alternatively, you can email the editorial team (at) simplywallst.com.

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