Stock Analysis

Here's Why Filtronic (LON:FTC) Has Caught The Eye Of Investors

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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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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

See our latest analysis for Filtronic

How Fast Is Filtronic Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's easy to see why many investors focus in on EPS growth. Filtronic's EPS shot up from UK£0.0037 to UK£0.0058; a result that's bound to keep shareholders happy. That's a fantastic gain of 57%.

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. Filtronic maintained stable EBIT margins over the last year, all while growing revenue 6.1% to UK£17m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

AIM:FTC Earnings and Revenue History March 15th 2023

Fortunately, we've got access to analyst forecasts of Filtronic's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Filtronic 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did Filtronic insiders refrain from selling stock during the year, but they also spent UK£53k buying it. This is a good look for the company as it paints an optimistic picture for the future. It is also worth noting that it was CEO & Executive Director Richard Gibbs who made the biggest single purchase, worth UK£19k, paying UK£0.11 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Filtronic insiders own more than a third of the company. In fact, they own 42% of the shares, making insiders a very influential shareholder group. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. Valued at only UK£27m Filtronic is really small for a listed company. That means insiders only have UK£12m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Does Filtronic Deserve A Spot On Your Watchlist?

You can't deny that Filtronic has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. These things considered, this is one stock worth watching. Even so, be aware that Filtronic is showing 2 warning signs in our investment analysis , you should know about...

The good news is that Filtronic 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.

Valuation is complex, but we're helping make it simple.

Find out whether Filtronic is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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Filtronic plc designs, develops, manufactures, and sells advanced radio frequency (RF) communications equipment for telecommunications infrastructure, aerospace and defense, critical communications, and space market sectors in the United Kingdom, Europe, the Americas, and internationally.

Flawless balance sheet with acceptable track record.