Yahoo Finance Do Fabrinet's (NYSE:FN) Earnings Warrant Your Attention?
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. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Fabrinet (NYSE:FN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Fabrinet
How Fast Is Fabrinet Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Impressively, Fabrinet has grown EPS by 27% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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 for Fabrinet remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 9.0% to US$2.9b. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Fabrinet's future profits.
Are Fabrinet Insiders Aligned With All Shareholders?
Owing to the size of Fabrinet, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Indeed, they hold US$38m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.5%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Is Fabrinet Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into Fabrinet's strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Fabrinet that you should be aware of.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
