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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Future (LON:FUTR). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Future's Improving Profits
In the last three years Future's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. In previous twelve months, Future's EPS has risen from UK£0.66 to UK£0.72. That amounts to a small improvement of 9.7%.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Future remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 58% to UK£739m. 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 Future?
Are Future Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
First and foremost; there we saw no insiders sell Future shares in the last year. Even better, though, is that the CEO & Executive Director, Zillah Byng-Thorne, bought a whopping UK£332k worth of shares, paying about UK£26.37 per share, on average. Big buys like that may signal an opportunity; actions speak louder than words.
On top of the insider buying, it's good to see that Future insiders have a valuable investment in the business. Notably, they have an enviable stake in the company, worth UK£117m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.
Should You Add Future To Your Watchlist?
As previously touched on, Future is a growing business, which is encouraging. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Even so, be aware that Future is showing 2 warning signs in our investment analysis , you should know about...
Keen growth investors love to see insider buying. Thankfully, Future 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.