I did a stock analysis for profit growth and Fox-Wizel (TLV: FOX) went off with ease
Some have more money than common sense, they say, so even companies with no income, no profit, and a record of failure can easily find investors. But the reality is that when a business loses money every year, for long enough, its investors will usually take their share of those losses.
In the age of investing in the blue sky of tech stocks, my choice may seem old-fashioned; I always prefer profitable businesses like Fox-Wizel (TLV: FOX). Even if stocks are fully valued today, most capitalists would recognize its benefits as a demonstration of constant value generation. By comparison, loss-making companies act like a sponge for capital – but unlike such a sponge, they don’t always produce something when in a hurry.
See our latest analysis for Fox-Wizel
How fast is Fox-Wizel growing?
The market is a short-term voting machine, but a long-term weighing machine, so the stock price eventually follows earnings per share (EPS). Therefore, many investors like to buy stocks of companies with growing EPS. While a tree regularly reaches the sky, Fox-Wizel’s EPS has increased by 31% each year, compound, over three years. If the company can support this kind of growth, we expect shareholders to come out ahead.
I like to see top line growth as an indication that growth is sustainable, and I look for a high profit margin before interest and taxes (EBIT) to indicate a competitive gap (although some companies with low margins also have ditches). Fox-Wizel shareholders can rely on the fact that EBIT margins are up 6.8% to 13% and revenues are increasing. Checking those two boxes is a good sign of growth in my book.
The graph below shows how the company’s bottom line has progressed over time. For more details, click on the image.
While profitability is the driving force behind the upswing, cautious investors are always checking the balance sheet as well.
Are Fox-Wizel Insiders Aligned With All Shareholders?
I like that business leaders have some skin in the game, so to speak, because it increases the alignment of incentives between the people who run the business and its real owners. So it’s good to see that Fox-Wizel insiders have a lot of capital invested in the stock. Notably, they own a huge stake in the company, worth 1.6 billion yen. With 23% of the activity, this participation gives insiders a lot of influence and many reasons to generate value for the shareholders. Very encouraging.
Does Fox-Wizel deserve a spot on your watchlist?
You cannot deny that Fox-Wizel has increased its earnings per share at a very impressive rate. It is attractive. I think the growth in BPA is something to brag about, and it doesn’t surprise me that insiders are keeping a considerable share of stocks. So this is most likely the kind of business that I like to spend time researching, in order to discern its true value. Remember that there can still be risks. For example, we have identified 2 warning signs for Fox-Wizel that you need to be aware of.
You can invest in any business. But if you’d rather focus on stocks that have been the subject of insider buys, here’s a list of companies that have made insider buys in the past three months.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.