Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Fiducian Group (ASX:FID). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.
How Fast Is Fiducian Group Growing?
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). That makes EPS growth an attractive quality for any company. Impressively, Fiducian Group has grown EPS by 17% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Fiducian Group maintained stable EBIT margins over the last year, all while growing revenue 9.3% to AU$53m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Fiducian Group isn't a huge company, given its market capitalization of AU$157m. That makes it extra important to check on its balance sheet strength.
Are Fiducian Group Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
While Fiducian Group insiders did net -AU$544.4k selling stock over the last year, they invested AU$866k, a much higher figure. You could argue that level of buying implies genuine confidence in the business. We also note that it was the Founder, Inderjit Singh, who made the biggest single acquisition, paying AU$159k for shares at about AU$5.43 each.
On top of the insider buying, we can also see that Fiducian Group insiders own a large chunk of the company. In fact, they own 43% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. With that sort of holding, insiders have about AU$68m riding on the stock, at current prices. That's nothing to sneeze at!
Is Fiducian Group Worth Keeping An Eye On?
For growth investors like me, Fiducian Group's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. So I do think this is one stock worth watching. Even so, be aware that Fiducian Group is showing 1 warning sign in our investment analysis , you should know about...
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Fiducian Group, you'll probably love this free list of growing companies that insiders are buying.
Please note 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 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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