Yahoo Finance Do United Fire Group's (NASDAQ:UFCS) Earnings Warrant Your Attention?
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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in United Fire Group (NASDAQ:UFCS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide United Fire Group with the means to add long-term value to shareholders.
See our latest analysis for United Fire Group
How Fast Is United Fire Group Growing Its Earnings Per Share?
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. Which is why EPS growth is looked upon so favourably. It is awe-striking that United Fire Group's EPS went from US$0.56 to US$2.09 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that, last year, United Fire Group's revenue from operations was lower than its revenue, so that could distort our analysis of its margins. We note that while EBIT margins have improved from 1.2% to 6.7%, the company has actually reported a fall in revenue by 12%. While not disastrous, these figures could be better.
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.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check United Fire Group's balance sheet strength, before getting too excited.
Are United Fire Group 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
It's good to see United Fire Group insiders walking the walk, by spending US$283k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. It is also worth noting that it was Independent Director George Milligan who made the biggest single purchase, worth US$144k, paying US$28.74 per share.
Along with the insider buying, another encouraging sign for United Fire Group is that insiders, as a group, have a considerable shareholding. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$104m. That equates to 14% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.
Does United Fire Group Deserve A Spot On Your Watchlist?
United Fire Group's earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest United Fire Group belongs near the top of your watchlist. However, before you get too excited we've discovered 2 warning signs for United Fire Group (1 is a bit concerning!) that you should be aware of.
The good news is that United Fire Group is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
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.
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