I Ran A Stock Scan For Earnings Growth And Fubon Financial Holding (TPE:2881) Passed With Ease

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without 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.

So if you're like me, you might be more interested in profitable, growing companies, like Fubon Financial Holding (TPE:2881). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

View our latest analysis for Fubon Financial Holding

How Quickly Is Fubon Financial Holding Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, Fubon Financial Holding's EPS has grown 18% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of Fubon Financial Holding's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Fubon Financial Holding shareholders can take confidence from the fact that EBIT margins are up from 15% to 23%, and revenue is growing. 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. Click on the chart to see the exact numbers.

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

Are Fubon Financial Holding Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a NT$632b company like Fubon Financial Holding. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth NT$37b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Does Fubon Financial Holding Deserve A Spot On Your Watchlist?

You can't deny that Fubon Financial Holding has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. You still need to take note of risks, for example - Fubon Financial Holding has 3 warning signs (and 1 which is potentially serious) we think you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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. 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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