The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Fiserv ($FISV), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognizing businesses that can consistently produce it.
How Fast Is Fiserv Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Fiserv has grown EPS by 29% per year, compound, in the last three years. As a general rule, I'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. Fiserv shareholders can take confidence from the fact that EBIT margins are up from 15% to 22%, and revenue is growing. That's great to see, on both counts.
Are Fiserv Insiders Aligned With All Shareholders?
Since Fiserv has a market capitalization of US$70b, I wouldn't expect insiders to hold a large percentage of shares. But I do take comfort from the fact that they are investors in the company. I note that their impressive stake in the company is worth US$360m. This comes in at 0.5% of shares in the company, which is a fair amount of a business of this size. This still shows shareholders there is a degree of alignment between management and themselves.
Does Fiserv Deserve A Spot On Your Watchlist?
You can't deny that Fiserv has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value.
[link] [comments] https://www.reddit.com/r/stocks/comments/142bld1/does_fiserv_fisv_deserve_a_spot_on_your_watchlist/
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