Should You Be Adding Lument Finance Trust (NYSE:LFT) To Your Watchlist Today?

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Lument Finance Trust (NYSE:LFT). 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.

Check out our latest analysis for Lument Finance Trust

Lument Finance Trust's Improving Profits

In the last three years Lument Finance Trust's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Lument Finance Trust's EPS shot from US$0.11 to US$0.34, over the last year. You don't see 196% year-on-year growth like that, very often.

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. Not all of Lument Finance Trust'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. While we note Lument Finance Trust's EBIT margins were flat over the last year, revenue grew by a solid 18% to US$19m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Lument Finance Trust EPS 100% free.

Are Lument Finance Trust Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

In the last year insider at Lument Finance Trust were both selling and buying shares; but happily, as a group they spent US$180k more on stock, than they netted from selling it. On balance, that's a good sign. We also note that it was the Director, James Hunt, who made the biggest single acquisition, paying US$31k for shares at about US$1.90 each.

Does Lument Finance Trust Deserve A Spot On Your Watchlist?

Lument Finance Trust's earnings per share have taken off like a rocket aimed right at the moon. If you're like me, you'll find it hard to ignore that sort of explosive EPS growth. And indeed, it could be a sign that the business is at an inflection point. For me, this situation certainly piques my interest. It is worth noting though that we have found 3 warning signs for Lument Finance Trust (2 are potentially serious!) 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 Lument Finance Trust, 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. 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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