With EPS Growth And More, Full Truck Alliance (NYSE:YMM) Makes An Interesting Case

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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

See our latest analysis for Full Truck Alliance

How Fast Is Full Truck Alliance Growing Its Earnings Per Share?

In the last three years Full Truck Alliance's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Full Truck Alliance's EPS shot from CN¥0.94 to CN¥2.28, over the last year. It's not often a company can achieve year-on-year growth of 142%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Full Truck Alliance shareholders is that EBIT margins have grown from 3.6% to 14% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. 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 Full Truck Alliance's forecast profits?

Are Full Truck Alliance Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$8.5b company like Full Truck Alliance. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth CN¥886m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Does Full Truck Alliance Deserve A Spot On Your Watchlist?

Full Truck Alliance's earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Full Truck Alliance very closely. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Full Truck Alliance , and understanding this should be part of your investment process.

Although Full Truck Alliance certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com