If You Like EPS Growth Then Check Out finnCap Group (LON:FCAP) Before It's Too Late

By
Simply Wall St
Published
December 31, 2021
AIM:FCAP
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in finnCap Group (LON:FCAP). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for finnCap Group

finnCap Group's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud finnCap Group's stratospheric annual EPS growth of 38%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note finnCap Group's EBIT margins were flat over the last year, revenue grew by a solid 74% to UK£57m. That's progress.

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.

earnings-and-revenue-history
AIM:FCAP Earnings and Revenue History December 31st 2021

Since finnCap Group is no giant, with a market capitalization of UK£54m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are finnCap Group Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We note that finnCap Group insiders spent UK£60k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Group CEO & Director, Samantha Smith, who made the biggest single acquisition, paying UK£40k for shares at about UK£0.30 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since finnCap Group insiders own more than a third of the company. Indeed, with a collective holding of 57%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. In terms of absolute value, insiders have UK£30m invested in the business, using the current share price. That's nothing to sneeze at!

Is finnCap Group Worth Keeping An Eye On?

finnCap Group's earnings per share have taken off like a rocket aimed right at the moon. Just as heartening; insiders both own and are buying more stock. Because of the potential that it has reached an inflection point, I'd suggest finnCap Group belongs on the top of your watchlist. Still, you should learn about the 3 warning signs we've spotted with finnCap Group .

The good news is that finnCap Group is not the only growth stock with insider buying. Here's a list of them... 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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