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 completely lacks a track record of revenue and profit. 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like First of Long Island (NASDAQ:FLIC). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. 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 of Long Island Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. We can see that in the last three years First of Long Island grew its EPS by 7.7% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. I note that First of Long Island's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. First of Long Island maintained stable EBIT margins over the last year, all while growing revenue 6.3% to US$109m. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future First of Long Island EPS 100% free.
Are First of Long Island Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that First of Long Island insiders have a significant amount of capital invested in the stock. Indeed, they hold US$27m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 5.2% of the company; visible skin in the game.
Is First of Long Island Worth Keeping An Eye On?
As I already mentioned, First of Long Island is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. If you think First of Long Island might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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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