Here’s Why I Think FLEX LNG (OB:FLNG) Might Be Worth Your Attention Today
Like a puppy chasing its tail, some new investors are often looking for “the next big thing,” even if that means buying “history stocks” with no revenue, let alone profit. But as Warren Buffett said, “If you’ve been playing poker for half an hour and you still don’t know who the sucker is, you’re the sucker.” When buying such stocks, investors are too often suckers.
Contrary to all that, I prefer to spend time on companies like FLEX LNG (OB:FLNG), which not only generates revenue, but also profits. Although profit is not necessarily a social good, it is easy to admire a company that can produce it consistently. In comparison, loss-making companies act like a sponge for capital – but unlike such a sponge, they don’t always produce something when pressed.
Check out our latest analysis for FLEX LNG
Improved profits of FLEX LNG
In a capitalist society, capital drives out profits, which means stock prices tend to rise with earnings per share (EPS). So like the hint of a smile on a face I love, EPS growth usually makes me look twice. It is therefore impressive that FLEX LNG’s EPS rose from US$0.15 to US$3.05 in just one year. While this rate of growth is unlikely to be repeated, it looks like a breakout improvement. But the key is to discern if something profound has changed or if it’s just a one-time nudge.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. The good news is that FLEX LNG is increasing its revenues and EBIT margins have improved by 12.6 percentage points to 59% compared to last year. Checking those two boxes is a good sign of growth, in my book.
The graph below shows how the company’s bottom line and top results have grown over time. Click on the table to see the exact numbers.
The trick, as an investor, is to find companies that go to perform well in the future, not just in the past. To that end, right now and today, you can view our 100% Free Future FLEX LNG EPS Future Analyst Consensus Forecast Visualization.
Are FLEX LNG insiders aligned with all shareholders?
Personally, I like to see high insider ownership in a company, as it suggests that it will be run in the interests of shareholders. We are therefore pleased to report that FLEX LNG insiders own a significant share of the business. In fact, with 47% of the company to their name, insiders are deeply invested in the company. I take comfort in this type of alignment, as it suggests that the company will be run for the benefit of shareholders. At the current share price, this insider stake is worth US$4.9 billion. That’s what I call serious skin in the game!
Should you add FLEX LNG to your watchlist?
FLEX LNG’s revenue took off like any random cryptocurrency in 2017. This type of growth is just eye-catching, and the significant investment held by insiders certainly informs my view of the business. The hope is, of course, that the strong growth marks a fundamental improvement in the business economy. So, in my opinion, FLEX LNG deserves to be put on your watch list; after all, shareholders succeed when the market undervalues fast-growing companies. What about the risks? Every business has them, and we’ve spotted 2 warning signs for FLEX LNG (1 of which is potentially serious!) that you should know about.
Of course, you can (sometimes) buy stocks that are not increased income and do not have insiders buying stocks. But as a growth investor, I always like to check out companies that do have these characteristics. You can access a free list of them here.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.