For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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. 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Fiske (LON:FKE). 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.
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Fiske has grown EPS by 10% per year. That's a good rate of growth, if it can be sustained.
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. EBIT margins for Fiske remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 26% to UK£7.4m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
AIM:FKE Earnings and Revenue History November 20th 2024
Since Fiske is no giant, with a market capitalisation of UK£8.3m, you should definitely check its cash and debtbefore getting too excited about its prospects.
Are Fiske 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.
In the last year insider at Fiske were both selling and buying shares; but happily, as a group they spent UK£53k more on stock, than they netted from selling it. Shareholders who may have questioned insiders selling will find some reassurance in this fact. It is also worth noting that it was Chairman Tony Pattison who made the biggest single purchase, worth UK£13k, paying UK£0.52 per share.
And the insider buying isn't the only sign of alignment between shareholders and the board, since Fiske insiders own more than a third of the company. Owning 41% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Valued at only UK£8.3m Fiske is really small for a listed company. So despite a large proportional holding, insiders only have UK£3.4m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, James Philip Harrison is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Fiske with market caps under UK£158m is about UK£283k.
Fiske's CEO took home a total compensation package worth UK£251k in the year leading up to June 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Is Fiske Worth Keeping An Eye On?
One important encouraging feature of Fiske is that it is growing profits. 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. You still need to take note of risks, for example - Fiske has 1 warning sign we think you should be aware of.
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.
