Is Now The Time To Put Foxtons Group (LON:FOXT) On Your Watchlist?
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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Foxtons Group (LON:FOXT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Foxtons Group with the means to add long-term value to shareholders.
See our latest analysis for Foxtons Group
Foxtons Group's Improving Profits
Over the last three years, Foxtons Group has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Foxtons Group's EPS shot from UK£0.016 to UK£0.036, over the last year. It's not often a company can achieve year-on-year growth of 119%.
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. The music to the ears of Foxtons Group shareholders is that EBIT margins have grown from 6.4% to 11% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Foxtons Group's future EPS 100% free.
Are Foxtons Group 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We note that Foxtons Group insiders spent UK£157k on stock, over the last year; in contrast, we didn't see any selling. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. It is also worth noting that it was Independent Chairman Nigel Sutherland Rich who made the biggest single purchase, worth UK£107k, paying UK£0.43 per share.
Should You Add Foxtons Group To Your Watchlist?
Foxtons Group's earnings have taken off in quite an impressive fashion. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And indeed, it could be a sign that the business is at an inflection point. If this is the case, then keeping a watch over Foxtons Group could be in your best interest. It is worth noting though that we have found 1 warning sign for Foxtons Group that you need to take into consideration.
The good news is that Foxtons Group is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
