Is it time to put Festi hf (ICE: FESTI) on your watchlist?
It is only natural that many investors, especially those new to the game, would rather buy “hot” stocks with a good story, even if those companies are losing money. But as Warren Buffett said, “If you’ve been playing poker for half an hour and you still don’t know what’s the noise, you’re the noise.” When buying such historical stocks, investors are too often the fools.
So if you’re like me, you might be more interested in profitable and growing businesses like Festi hf (ICE CREAM: FESTI). While profit isn’t necessarily social good, it’s easy to admire a business that can consistently produce it. In 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.
Check out our latest review for Festi hf
Improving Festi hf profits
Even with very modest growth rates, a company will generally do well if it improves its earnings per share (EPS) year after year. So, the growth of EPS can certainly make an investor take note of a security. Festi hf increased its EPS for the last twelve months from 8.44 Kr to 9.46 Kr last year. That’s a 12% gain; respectable growth in all things.
I like to see revenue 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 low-margin companies also have ditches). Although we note that Festi hf’s EBIT margins were stable over the past year, revenues increased 8.6% to reach NKr 92 billion. It’s really positive.
In the graph below, you can see how the business has increased its profit and revenue over time. Click on the graph to see the exact numbers.
While profitability is the driving force behind the upswing, cautious investors are also always checking the balance sheet.
Are Festi hf insiders aligned with all shareholders?
I always like to check the CEO’s compensation, because I think reasonable compensation levels, around or below the median, can be a sign that shareholders’ interests are being taken into account. I found out that the median total compensation of CEOs of companies like Festi hf with market caps between Kr26b and Kr104b is around Kr88m.
The CEO of Festi hf received 68 million crowns in compensation for the year ended. This is lower than the average for similar sized companies and seems pretty reasonable to me. CEO compensation levels aren’t the most important metric for investors, but when the salary is modest, it promotes better alignment between the CEO and common shareholders. It can also be a sign of a culture of integrity, in the broad sense.
Is Festi hf worth watching?
As I mentioned before, Festi hf is a growing company which is what I like to see. Not only that, but the CEO is paid quite reasonably which gives me more confidence in the board. So overall I think it’s at least worth considering for your watchlist. We should say that we found out 3 warning signs for Festi hf (2 cannot be ignored!) Which you should be aware of before investing here.
While Festi hf certainly looks good to me, I would like more insiders to buy stocks. If you also like to see insider buying then this free list of growing companies that insiders are buying, might be exactly what you are looking for.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
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 shares 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 the mentioned stocks.
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