If EPS Growth Is Important To You, Frontier Transport Holdings (JSE:FTH) Presents An Opportunity

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Frontier Transport Holdings (JSE:FTH). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Frontier Transport Holdings

How Fast Is Frontier Transport Holdings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Impressively, Frontier Transport Holdings has grown EPS by 19% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. The music to the ears of Frontier Transport Holdings shareholders is that EBIT margins have grown from 15% to 17% in the last 12 months and revenues are on an upwards trend as well. 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.

Since Frontier Transport Holdings is no giant, with a market capitalisation of R2.0b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Frontier Transport Holdings Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We haven't seen any insiders selling Frontier Transport Holdings shares, in the last year. With that in mind, it's heartening that Francois Meyer, the CEO & Executive Director of the company, paid R92k for shares at around R4.85 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

Does Frontier Transport Holdings Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Frontier Transport Holdings' strong EPS growth. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. So on this analysis, Frontier Transport Holdings is probably worth spending some time on. You still need to take note of risks, for example - Frontier Transport Holdings has 2 warning signs we think you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Frontier Transport Holdings isn't the only one. You can see a a curated list of South African companies which have exhibited consistent growth accompanied by high insider ownership.

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.