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 First Quantum Minerals (TSE:FM). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
How Quickly Is First Quantum Minerals Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud First Quantum Minerals's stratospheric annual EPS growth of 51%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching 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. The good news is that First Quantum Minerals is growing revenues, and EBIT margins improved by 6.3 percentage points to 21%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of First Quantum Minerals's forecast profits?
Are First Quantum Minerals Insiders Aligned With All Shareholders?
Since First Quantum Minerals has a market capitalization of CA$8.4b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. With a whopping US$114m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to make me think that management will be very focussed on long term growth.
Is First Quantum Minerals Worth Keeping An Eye On?
First Quantum Minerals's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind First Quantum Minerals is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Now, you could try to make up your mind on First Quantum Minerals by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
Although First Quantum Minerals certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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