Yahoo Finanzen Here's Why We Think FirstRand (JSE:FSR) Might Deserve Your Attention Today
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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like FirstRand (JSE:FSR), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide FirstRand with the means to add long-term value to shareholders.
View our latest analysis for FirstRand
FirstRand's Earnings Per Share Are 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 means EPS growth is considered a real positive by most successful long-term investors. FirstRand's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 39%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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. It's noted that FirstRand'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 FirstRand achieved similar EBIT margins to last year, revenue grew by a solid 11% to R125b. That's progress.
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of FirstRand's forecast profits?
Are FirstRand 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The R69m worth of shares that insiders sold during the last 12 months pales in comparison to the R287m they spent on acquiring shares in the company. This adds to the interest in FirstRand because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Chief Executive Officer of RMB Emmarentia Brown who made the biggest single purchase, worth R157m, paying R64.86 per share.
The good news, alongside the insider buying, for FirstRand bulls is that insiders (collectively) have a meaningful investment in the stock. Holding R968m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Mary Vilakazi is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations over R148b, like FirstRand, the median CEO pay is around R54m.
FirstRand's CEO took home a total compensation package worth R35m in the year leading up to June 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does FirstRand Deserve A Spot On Your Watchlist?
FirstRand's earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe FirstRand deserves timely attention. You should always think about risks though. Case in point, we've spotted 1 warning sign for FirstRand you should be aware of.
The good news is that FirstRand is not the only growth stock with insider buying. Here's a list of growth-focused companies in ZA with 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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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.
