Is Now The Time To Put X-FAB Silicon Foundries (EPA:XFAB) On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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.

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 X-FAB Silicon Foundries (EPA:XFAB). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for X-FAB Silicon Foundries

How Fast Is X-FAB Silicon Foundries Growing Its Earnings Per Share?

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. It is awe-striking that X-FAB Silicon Foundries' EPS went from US$0.40 to US$1.24 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. This could point to the business hitting a point of inflection.

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. The music to the ears of X-FAB Silicon Foundries shareholders is that EBIT margins have grown from 12% to 17% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for X-FAB Silicon Foundries?

Are X-FAB Silicon Foundries Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. Our analysis has discovered that the median total compensation for the CEOs of companies like X-FAB Silicon Foundries with market caps between US$400m and US$1.6b is about US$719k.

The X-FAB Silicon Foundries CEO received US$522k in compensation for the year ending December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is X-FAB Silicon Foundries Worth Keeping An Eye On?

X-FAB Silicon Foundries' earnings per share growth have been climbing higher at an appreciable rate. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. What's more, the fact that the CEO's compensation is quite reasonable is a sign that the company is conscious of excessive spending. So faced with these facts, it seems that researching this stock a little more may lead you to discover an investment opportunity that meets your quality standards. Now, you could try to make up your mind on X-FAB Silicon Foundries by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although X-FAB Silicon Foundries certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of French companies that not only boast of strong growth but have also seen recent insider buying..

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.