Here's Why We Think Fox (NASDAQ:FOXA) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Fox (NASDAQ:FOXA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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Fox's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Fox has grown EPS by 27% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Fox maintained stable EBIT margins over the last year, all while growing revenue 16% to US$16b. 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.

View our latest analysis for Fox

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 Fox's future profits.

Are Fox 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We did see some selling in the last twelve months, but that's insignificant compared to the whopping US$4.7m that the Executive Chairman & CEO, Lachlan Murdoch spent acquiring shares. The average price paid was about US$39.06. It's not often you see purchases like this and so it should be on the radar of everyone who follows Fox.

Along with the insider buying, another encouraging sign for Fox is that insiders, as a group, have a considerable shareholding. We note that their impressive stake in the company is worth US$168m. While that is a lot of skin in the game, we note this holding only totals to 0.7% of the business, which is a result of the company being so large. This still shows shareholders there is a degree of alignment between management and themselves.

Is Fox Worth Keeping An Eye On?

You can't deny that Fox has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for Fox that you need to be mindful of.

The good news is that Fox 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.