In This Article:
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. 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 Futu Holdings (NASDAQ:FUTU). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Futu Holdings with the means to add long-term value to shareholders.
Check out our latest analysis for Futu Holdings
How Fast Is Futu Holdings Growing?
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. That makes EPS growth an attractive quality for any company. Impressively, Futu Holdings has grown EPS by 20% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. It's noted that Futu Holdings' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Futu Holdings achieved similar EBIT margins to last year, revenue grew by a solid 11% to HK$9.0b. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Futu Holdings.
Are Futu Holdings Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that Futu Holdings insiders own a significant number of shares certainly is appealing. Actually, with 37% of the company to their names, insiders are profoundly invested in the business. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. And their holding is extremely valuable at the current share price, totalling HK$3.1b. That means they have plenty of their own capital riding on the performance of the business!