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I Ran A Stock Scan For Earnings Growth And First Horizon (NYSE:FHN) Passed With Ease

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·5 min read
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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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

So if you're like me, you might be more interested in profitable, growing companies, like First Horizon (NYSE:FHN). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

See our latest analysis for First Horizon

First Horizon's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. I, for one, am blown away by the fact that First Horizon has grown EPS by 42% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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. Not all of First Horizon's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. First Horizon maintained stable EBIT margins over the last year, all while growing revenue 25% to US$2.3b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
earnings-and-revenue-history

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 Horizon EPS 100% free.

Are First Horizon Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.

We note that First Horizon insiders spent US$123k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Independent Director, Mark Emkes, who made the biggest single acquisition, paying US$94k for shares at about US$9.42 each.

On top of the insider buying, it's good to see that First Horizon insiders have a valuable investment in the business. Notably, they have an enormous stake in the company, worth US$156m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, D. Jordan, is paid less than the median for similar sized companies. For companies with market capitalizations between US$4.0b and US$12b, like First Horizon, the median CEO pay is around US$6.4m.

The First Horizon CEO received US$5.6m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does First Horizon Deserve A Spot On Your Watchlist?

First Horizon's earnings have taken off like any random crypto-currency did, back in 2017. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe First Horizon deserves timely attention. However, before you get too excited we've discovered 3 warning signs for First Horizon (2 shouldn't be ignored!) that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of First Horizon, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.