Here's Why We Think Fortis (TSE:FTS) Is Well Worth Watching
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Fortis (TSE:FTS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Fortis with the means to add long-term value to shareholders.
See our latest analysis for Fortis
How Fast Is Fortis 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. Fortis' EPS has risen over the last 12 months, growing from CA$2.65 to CA$2.94. That's a 11% gain; respectable growth in the broader scheme of things.
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. Fortis maintained stable EBIT margins over the last year, all while growing revenue 15% to CA$12b. 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 Fortis?
Are Fortis Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The CA$156k worth of shares that insiders sold during the last 12 months pales in comparison to the CA$1.8m they spent on acquiring shares in the company. We find this encouraging because it suggests they are optimistic about Fortis'future. It is also worth noting that it was President David Hutchens who made the biggest single purchase, worth CA$1.0m, paying CA$53.33 per share.
Along with the insider buying, another encouraging sign for Fortis is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at CA$27m. This considerable investment should help drive long-term value in the business. Even though that's only about 0.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Is Fortis Worth Keeping An Eye On?
One important encouraging feature of Fortis is that it is growing profits. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Fortis (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
Keen growth investors love to see insider buying. Thankfully, Fortis 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.
