We Ran A Stock Scan For Earnings Growth And First Resources (SGX:EB5) Passed With Ease

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like First Resources (SGX:EB5), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Our analysis indicates that EB5 is potentially undervalued!

First Resources' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. First Resources' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 45%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. The good news is that First Resources is growing revenues, and EBIT margins improved by 9.1 percentage points to 32%, over the last year. That's great to see, on both counts.

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.

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

Are First Resources Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalisations between US$1.0b and US$3.2b, like First Resources, the median CEO pay is around US$1.2m.

First Resources' CEO took home a total compensation package worth US$932k in the year leading up to December 2021. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is First Resources Worth Keeping An Eye On?

First Resources' earnings per share have been soaring, with growth rates sky high. This appreciable increase in earnings could be a sign of an upward trajectory for the company. At the same time the reasonable CEO compensation reflects well on the board of directors. So First Resources looks like it could be a good quality growth stock, at first glance. That's worth watching. You should always think about risks though. Case in point, we've spotted 2 warning signs for First Resources you should be aware of, and 1 of them is a bit concerning.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.