Yahoo Finance Should You Be Adding Futu Holdings (NASDAQ:FUTU) To Your Watchlist Today?
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In contrast to all that, I prefer to spend time on companies like Futu Holdings (NASDAQ:FUTU), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
View our latest analysis for Futu Holdings
Futu Holdings's Improving Profits
Over the last three years, Futu Holdings has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Futu Holdings's EPS shot from HK$10.23 to HK$19.12, over the last year. Year on year growth of 87% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Futu Holdings's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Futu Holdings maintained stable EBIT margins over the last year, all while growing revenue 116% to HK$6.7b. 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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Futu Holdings's forecast profits?
Are Futu Holdings Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Futu Holdings insiders have a significant amount of capital invested in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at HK$1.7b. That equates to 34% of the company, making insiders powerful and aligned with other shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.
Is Futu Holdings Worth Keeping An Eye On?
Futu Holdings's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Futu Holdings is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We don't want to rain on the parade too much, but we did also find 1 warning sign for Futu Holdings that you need to be mindful of.
Although Futu Holdings certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
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.
