X-FAB Silicon Foundries (EPA:XFAB) Ticks All The Boxes When It Comes To Earnings Growth

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like X-FAB Silicon Foundries (EPA:XFAB). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide X-FAB Silicon Foundries with the means to add long-term value to shareholders.

View our latest analysis for X-FAB Silicon Foundries

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

In the last three years X-FAB Silicon Foundries' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Over the last year, X-FAB Silicon Foundries increased its EPS from US$0.50 to US$0.54. That amounts to a small improvement of 7.2%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. X-FAB Silicon Foundries shareholders can take confidence from the fact that EBIT margins are up from 4.0% to 10%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for X-FAB Silicon Foundries' future EPS 100% free.

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

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalisations between US$400m and US$1.6b, like X-FAB Silicon Foundries, the median CEO pay is around US$593k.

The X-FAB Silicon Foundries CEO received US$451k in compensation for the year ending December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add X-FAB Silicon Foundries To Your Watchlist?

As previously touched on, X-FAB Silicon Foundries is a growing business, which is encouraging. Not only that, but the CEO is paid quite reasonably, which should prompt investors to feel more trusting of the board of directors. So based on its merits, the stock deserves further research, if not an addition to your watchlist. Even so, be aware that X-FAB Silicon Foundries is showing 1 warning sign in our investment analysis , you should know about...

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 insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.