Here's Why Finbond Group (JSE:FGL) Has Caught The Eye Of Investors
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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
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 Finbond Group (JSE:FGL). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
How Fast Is Finbond Group Growing Its Earnings Per Share?
Finbond Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Finbond Group's EPS shot from R0.07 to R0.15, over the last year. Year on year growth of 112% is certainly a sight to behold.
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 Finbond Group's 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 Finbond Group achieved similar EBIT margins to last year, revenue grew by a solid 5.4% to R1.8b. That's encouraging news for the company!
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Check out our latest analysis for Finbond Group
Finbond Group isn't a huge company, given its market capitalisation of R254m. That makes it extra important to check on its balance sheet strength.
Are Finbond Group Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The good news for Finbond Group shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Non-Executive Director Sean Riskowitz bought R601k worth of shares at an average price of around R0.95. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.
Is Finbond Group Worth Keeping An Eye On?
Finbond Group's earnings per share growth have been climbing higher at an appreciable rate. Growth-minded people will be intrigued by the incredible movement in EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If this is the case, then keeping a watch over Finbond Group could be in your best interest. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Finbond Group (at least 2 which are a bit concerning) , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Finbond Group, you'll probably love this curated collection of companies in ZA that have an attractive valuation alongside insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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