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With EPS Growth And More, AFH Financial Group (LON:AFHP) Is Interesting

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like AFH Financial Group (LON:AFHP). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for AFH Financial Group

How Quickly Is AFH Financial Group Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud AFH Financial Group's stratospheric annual EPS growth of 44%, compound, over the last three years? Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

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. AFH Financial Group shareholders can take confidence from the fact that EBIT margins are up from 14% to 17%, and revenue is growing. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

AIM:AFHP Income Statement, January 18th 2020
AIM:AFHP Income Statement, January 18th 2020

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of AFH Financial Group's forecast profits?

Are AFH Financial Group Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

AFH Financial Group top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Non-Executive Director, Mark Chambers, paid UK£75k to buy shares at an average price of UK£3.09.

Along with the insider buying, another encouraging sign for AFH Financial Group is that insiders, as a group, have a considerable shareholding. With a whopping UK£39m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 24% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Does AFH Financial Group Deserve A Spot On Your Watchlist?

AFH Financial Group's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest AFH Financial Group belongs on the top of your watchlist. Of course, just because AFH Financial Group is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

As a growth investor I do like to see insider buying. But AFH Financial Group isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.