Is Now The Time To Put Flex LNG (OB:FLNG) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Flex LNG (OB:FLNG). 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.

See our latest analysis for Flex LNG

How Fast Is Flex LNG Growing Its Earnings Per Share?

Over the last three years, Flex LNG has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Flex LNG's EPS catapulted from US$1.30 to US$3.21, over the last year. Year on year growth of 147% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

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 good news is that Flex LNG is growing revenues, and EBIT margins improved by 6.8 percentage points to 57%, over the last year. 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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Flex LNG.

Are Flex LNG Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Flex LNG insiders own a meaningful share of the business. In fact, they own 47% 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. And their holding is extremely valuable at the current share price, totalling US$7.0b. This is an incredible endorsement from them.

Is Flex LNG Worth Keeping An Eye On?

Flex LNG's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Flex LNG very closely. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Flex LNG (1 is a bit unpleasant) you should be aware of.

Although Flex LNG 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.