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.'
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Lument Finance Trust (NYSE:LFT). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is Lument Finance Trust Growing Its Earnings Per Share?
In the last three years Lument Finance Trust's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Lument Finance Trust's EPS shot from US$0.11 to US$0.34, over the last year. Year on year growth of 196% is certainly a sight to behold.
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. I note that Lument Finance Trust's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Lument Finance Trust maintained stable EBIT margins over the last year, all while growing revenue 18% to US$19m. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Lument Finance Trust's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Lument Finance Trust Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We haven't seen any insiders selling Lument Finance Trust shares, in the last year. With that in mind, it's heartening that William Houlihan, the Independent Lead Director of the company, paid US$15k for shares at around US$2.44 each.
Is Lument Finance Trust Worth Keeping An Eye On?
Lument Finance Trust's earnings have taken off like any random crypto-currency did, back in 2017. Growth investors should find it difficult to look past that strong EPS move. And in fact, it could well signal a fundamental shift in the business economics. If that's the case, you may regret neglecting to put Lument Finance Trust on your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Lument Finance Trust (2 are a bit concerning) you should be aware of.
The good news is that Lument Finance Trust 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.
This article by Simply Wall St is general in nature. 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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