In This Article:
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like FFI Holdings (ASX:FFI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide FFI Holdings with the means to add long-term value to shareholders.
Check out our latest analysis for FFI Holdings
How Quickly Is FFI Holdings Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. To the delight of shareholders, FFI Holdings has achieved impressive annual EPS growth of 50%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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. EBIT margins have declined for FFI Holdings, but revenue stability should provide some reassurance to shareholders. Shareholders will be hopeful that the company can buck this trend.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
FFI Holdings isn't a huge company, given its market capitalisation of AU$52m. That makes it extra important to check on its balance sheet strength.
Are FFI Holdings Insiders Aligned With All Shareholders?
Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So those who are interested in FFI Holdings will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Indeed, with a collective holding of 58%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. To give you an idea, the value of insiders' holdings in the business are valued at AU$30m at the current share price. That should be more than enough to keep them focussed on creating shareholder value!