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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. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like First BanCorp (NYSE:FBP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide First BanCorp with the means to add long-term value to shareholders.
Check out our latest analysis for First BanCorp
First BanCorp's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that First BanCorp's EPS has grown 26% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. Our analysis has highlighted that First BanCorp's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. First BanCorp reported flat revenue and EBIT margins over the last year. That's not a major concern but nor does it point to the long term growth we like to see.
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.
Fortunately, we've got access to analyst forecasts of First BanCorp's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are First BanCorp Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. First BanCorp followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. With a whopping US$84m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to let shareholders know that management will be very focussed on long term growth.