Does FMC (NYSE:FMC) Deserve A Spot On Your Watchlist?

By
Simply Wall St
Published
November 24, 2021
NYSE:FMC
Source: Shutterstock

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like FMC (NYSE:FMC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for FMC

How Fast Is FMC Growing Its Earnings Per Share?

Over the last three years, FMC has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. It's good to see that FMC's EPS have grown from US$4.38 to US$4.86 over twelve months. I doubt many would complain about that 11% gain.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. FMC maintained stable EBIT margins over the last year, all while growing revenue 2.1% to US$4.8b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:FMC Earnings and Revenue History November 24th 2021

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for FMC?

Are FMC Insiders Aligned With All Shareholders?

Since FMC has a market capitalization of US$13b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Given insiders own a small fortune of shares, currently valued at US$60m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations over US$8.0b, like FMC, the median CEO pay is around US$11m.

FMC offered total compensation worth US$5.9m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add FMC To Your Watchlist?

One important encouraging feature of FMC is that it is growing profits. Earnings growth might be the main game for FMC, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. We don't want to rain on the parade too much, but we did also find 1 warning sign for FMC that you need to be mindful of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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