Here's Why We Think FirstCash Holdings (NASDAQ:FCFS) Is Well Worth Watching

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like FirstCash Holdings (NASDAQ:FCFS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide FirstCash Holdings with the means to add long-term value to shareholders.

Check out the opportunities and risks within the US Consumer Finance industry.

How Quickly Is FirstCash Holdings 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) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, FirstCash Holdings has grown EPS by 6.2% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that FirstCash Holdings' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. On the revenue front, FirstCash Holdings has done well over the past year, growing revenue by 56% to US$2.5b but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for FirstCash Holdings' future EPS 100% free.

Are FirstCash Holdings Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

While some insiders did sell some of their holdings in FirstCash Holdings, one lone insider trumped that with significant stock purchases. To be exact, AFF President Howard Hambleton put their money where their mouth is, paying US$1m at an average of price of US$75.82 per share That can definitely be seen as a sign of conviction.

On top of the insider buying, it's good to see that FirstCash Holdings insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$834m. Coming in at 20% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

Is FirstCash Holdings Worth Keeping An Eye On?

One positive for FirstCash Holdings is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Before you take the next step you should know about the 4 warning signs for FirstCash Holdings that we have uncovered.

Keen growth investors love to see insider buying. Thankfully, FirstCash Holdings isn't the only one. You can see a 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.