Here's Why I Think Fabryka Farb i Lakierów Sniezka (WSE:SKA) Is An Interesting Stock

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Fabryka Farb i Lakierów Sniezka (WSE:SKA). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

Check out our latest analysis for Fabryka Farb i Lakierów Sniezka

How Fast Is Fabryka Farb i Lakierów Sniezka 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Fabryka Farb i Lakierów Sniezka managed to grow EPS by 6.2% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Fabryka Farb i Lakierów Sniezka maintained stable EBIT margins over the last year, all while growing revenue 21% to zł824m. That's a real positive.

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.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Fabryka Farb i Lakierów Sniezka Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Fabryka Farb i Lakierów Sniezka shares worth a considerable sum. With a whopping zł256m worth of shares as a group, insiders have plenty riding on the company's success. At 23% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between zł746m and zł3.0b, like Fabryka Farb i Lakierów Sniezka, the median CEO pay is around zł1.5m.

Fabryka Farb i Lakierów Sniezka offered total compensation worth zł1.1m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Should You Add Fabryka Farb i Lakierów Sniezka To Your Watchlist?

One important encouraging feature of Fabryka Farb i Lakierów Sniezka is that it is growing profits. The fact that EPS is growing is a genuine positive for Fabryka Farb i Lakierów Sniezka, but the pretty picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. It is worth noting though that we have found 2 warning signs for Fabryka Farb i Lakierów Sniezka that you need to take into consideration.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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This article by Simply Wall St is general in nature. 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.
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