Here's Why We Think Frasers Group (LON:FRAS) 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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

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 Frasers Group (LON:FRAS). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Frasers Group

How Fast Is Frasers Group Growing Its Earnings Per Share?

Frasers 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. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Frasers Group's EPS grew from UK£0.53 to UK£1.11, over the previous 12 months. It's not often a company can achieve year-on-year growth of 108%.

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. While we note Frasers Group achieved similar EBIT margins to last year, revenue grew by a solid 16% to UK£5.6b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. 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 Frasers Group's forecast profits?

Are Frasers Group Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Frasers Group shares, in the last year. With that in mind, it's heartening that David Daly, the Non-Executive Chairman of the company, paid UK£20k for shares at around UK£6.45 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Frasers Group insiders own more than a third of the company. To be exact, company insiders hold 75% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. This insider holding amounts to That means they have plenty of their own capital riding on the performance of the business!

Is Frasers Group Worth Keeping An Eye On?

Frasers Group's earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Frasers Group belongs near the top of your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Frasers Group you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Frasers Group, you'll probably love this free list of growing companies that insiders are 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.