Do Flotek Industries' (NYSE:FTK) Earnings Warrant Your Attention?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Flotek Industries (NYSE:FTK). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Flotek Industries with the means to add long-term value to shareholders.

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Flotek Industries' Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It is awe-striking that Flotek Industries' EPS went from US$0.28 to US$1.07 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. Flotek Industries shareholders can take confidence from the fact that EBIT margins are up from 5.3% to 12%, and revenue is growing. That's great to see, on both counts.

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.

Check out our latest analysis for Flotek Industries

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Flotek Industries' future profits.

Are Flotek Industries Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We did see some selling in the last twelve months, but that's insignificant compared to the whopping US$1.8m that the Director, Matthew Wilks spent acquiring shares. We should note the average purchase price was around US$12.30. Big purchases like that are well worth noting, especially for those who like to follow the insider money.

On top of the insider buying, it's good to see that Flotek Industries insiders have a valuable investment in the business. Indeed, they hold US$13m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 2.9%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Ryan Ezell is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Flotek Industries with market caps between US$200m and US$800m is about US$2.3m.

Flotek Industries' CEO took home a total compensation package worth US$1.7m in the year leading up to December 2024. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Flotek Industries Worth Keeping An Eye On?

Flotek Industries' earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Flotek Industries deserves timely attention. Even so, be aware that Flotek Industries is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...

The good news is that Flotek Industries is not the only stock with insider buying. Here's a list of small cap, undervalued companies in the US 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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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.