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.  Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.  Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Frontline (NYSE:FRO). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Frontline's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price.  So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research.   Frontline managed to grow EPS by 12% per year, over three years.   That growth rate is fairly good, assuming the company can keep it up.  

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.    Frontline shareholders can take confidence from the fact that EBIT margins are up from 31% to 40%, and revenue is growing.  Both of which are great metrics to check off for potential growth.  

The chart below shows how the company's bottom and top lines have progressed over time.  Click on the chart to see the exact numbers.

NYSE:FRO Earnings and Revenue History May 6th 2024

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Frontline's forecast profits?

Are Frontline Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders.  So those who are interested in Frontline will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares.    Actually, with 36% of the company to their names, insiders are profoundly invested in the business.  Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value.     at the current share price.  This is an incredible endorsement from them.  

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest.  A brief analysis of the CEO compensation suggests they are.    Our analysis has discovered that the median total compensation for the CEOs of companies like Frontline with market caps between US$4.0b and US$12b is about US$8.4m.  

Frontline's CEO took home a total compensation package of US$2.1m in the year prior to December 2023.  That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders.   While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind.  Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Frontline Worth Keeping An Eye On?

One important encouraging feature of Frontline is that it is growing profits.   The fact that EPS is growing is a genuine positive for Frontline, but the pleasant picture gets better than that.  With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into.     What about risks? Every company has them, and we've spotted   3 warning signs for Frontline  (of which 1 doesn't sit too well with us!) you should know about.  

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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.