Does Focus Financial Partners (NASDAQ:FOCS) Deserve A Spot On Your Watchlist?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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 Focus Financial Partners (NASDAQ:FOCS). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Focus Financial Partners

How Quickly Is Focus Financial Partners 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). That makes EPS growth an attractive quality for any company. Who among us would not applaud Focus Financial Partners's stratospheric annual EPS growth of 41%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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. I note that Focus Financial Partners's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. The good news is that Focus Financial Partners is growing revenues, and EBIT margins improved by 2.1 percentage points to 12%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Focus Financial Partners's forecast profits?

Are Focus Financial Partners Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, 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.

One gleaming positive for Focus Financial Partners, in the last year, is that a certain insider has buying shares with ample enthusiasm. Indeed, Independent Director Kristine Mashinsky has accumulated shares over the last year, paying a total of US$997k at an average price of about US$49.85. It doesn't get much better than that, in terms of large investments from insiders.

Should You Add Focus Financial Partners To Your Watchlist?

Focus Financial Partners's earnings have taken off like any random crypto-currency did, back in 2017. If you're like me, you'll find it hard to ignore that sort of explosive EPS growth. And in fact, it could well signal a fundamental shift in the business economics. For me, this situation certainly piques my interest. It is worth noting though that we have found 3 warning signs for Focus Financial Partners (1 makes us a bit uncomfortable!) that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Focus Financial Partners, you'll probably love this free list of growing companies that insiders are buying.

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.