Does Finning International (TSE:FTT) Deserve A Spot On Your Watchlist?
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Finning International (TSE:FTT). 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 Finning International
How Fast Is Finning International Growing?
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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Finning International's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 47%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
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 Finning International achieved similar EBIT margins to last year, revenue grew by a solid 26% to CA$10b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Finning International?
Are Finning International 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Despite some Finning International insiders disposing of some shares, we note that there was CA$179k more in buying interest among those who know the company best Although some people may hesitate due to the share sales, the fact that insiders bought more than they sold, is a positive thing to note. It is also worth noting that it was Executive VP & CFO Greg Palaschuk who made the biggest single purchase, worth CA$106k, paying CA$35.28 per share.
Recent insider purchases of Finning International stock is not the only way management has kept the interests of the general public shareholders in mind. Specifically, the CEO is paid quite reasonably for a company of this size. The median total compensation for CEOs of companies similar in size to Finning International, with market caps between CA$2.7b and CA$8.7b, is around CA$4.5m.
Finning International's CEO took home a total compensation package worth CA$2.5m in the year leading up to December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Is Finning International Worth Keeping An Eye On?
Finning International's earnings have taken off in quite an impressive fashion. The company can also boast of insider buying, and reasonable remuneration for the CEO. The strong EPS growth suggests Finning International may be at an inflection point. If these have piqued your interest, then this stock surely warrants a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for Finning International (1 is a bit unpleasant!) that you need to be mindful of.
Keen growth investors love to see insider buying. Thankfully, Finning International 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.
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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.
