Here's Why We Think Bapcor (ASX:BAP) Is Well Worth Watching

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. 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.

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 Bapcor (ASX:BAP). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Bapcor

How Fast Is Bapcor Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's easy to see why many investors focus in on EPS growth. Bapcor's EPS has risen over the last 12 months, growing from AU$0.32 to AU$0.36. This amounts to a 13% gain; a figure that shareholders will be pleased to see.

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. While we note Bapcor achieved similar EBIT margins to last year, revenue grew by a solid 9.2% to AU$1.9b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart. earnings-and-revenue-history

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this freereport showing analyst forecasts for Bapcor's future profits.

Are Bapcor Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.



Any way you look at it Bapcor shareholders can gain quiet confidence from the fact that insiders shelled out AU$667k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. It is also worth noting that it was CEO, MD & Director Noel Anthony Meehan who made the biggest single purchase, worth AU$250k, paying AU$6.60 per share.

It's commendable to see that insiders have been buying shares in Bapcor, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalisations between AU$1.5b and AU$4.8b, like Bapcor, the median CEO pay is around AU$2.5m.

Bapcor offered total compensation worth AU$1.4m to its CEO in the year to June 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Bapcor To Your Watchlist?

As previously touched on, Bapcor is a growing business, which is encouraging. And that's not all. We've also seen insiders buying stock, and noted modest executive pay. If these factors aren't enough to secure Bapcor a spot on the watchlist, then it certainly warrants a closer look at the very least. You still need to take note of risks, for example - Bapcor has  1 warning sign  we think you should be aware of.

The good news is that Bapcor 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) simplywallst.com.

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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