Yahoo Finance Should You Be Adding First Solar (NASDAQ:FSLR) To Your Watchlist Today?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like First Solar (NASDAQ:FSLR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide First Solar with the means to add long-term value to shareholders.
View our latest analysis for First Solar
How Quickly Is First Solar Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that First Solar has managed to grow EPS by 25% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. The good news is that First Solar is growing revenues, and EBIT margins improved by 36.3 percentage points to 31%, over the last year. Both of which are great metrics to check off for potential growth.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for First Solar's future profits.
Are First Solar 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
While there was some insider selling, that pales in comparison to the US$74m that the company insider, Farhad Ebrahimi spent acquiring shares. The average price paid was about US$148. Big purchases like that are well worth noting, especially for those who like to follow the insider money.
On top of the insider buying, it's good to see that First Solar insiders have a valuable investment in the business. We note that their impressive stake in the company is worth US$1.2b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because First Solar's CEO, Mark Widmar, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations over US$8.0b, like First Solar, the median CEO pay is around US$14m.
First Solar offered total compensation worth US$7.7m to its CEO in the year to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is First Solar Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into First Solar's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. These things considered, this is one stock worth watching. You still need to take note of risks, for example - First Solar has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of First Solar, you'll probably love this curated collection of companies in the US that have witnessed growth alongside 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.
