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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
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 First Business Financial Services (NASDAQ:FBIZ). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide First Business Financial Services with the means to add long-term value to shareholders.
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, First Business Financial Services has grown EPS by 6.9% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.
One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of First Business Financial Services’ revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note First Business Financial Services achieved similar EBIT margins to last year, revenue grew by a solid 6.6% to US$145m. That’s encouraging news for the company!
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.
View our latest analysis for First Business Financial Services
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don’t exist, you can check our visualization of consensus analyst forecasts for First Business Financial Services’ future EPS 100% free.
It’s pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. First Business Financial Services followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have US$22m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 5.6% of the company; visible skin in the game.
