Here's Why We Think Forward Air (NASDAQ:FWRD) Is Well Worth Watching

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 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Forward Air (NASDAQ:FWRD). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Forward Air with the means to add long-term value to shareholders.

Check out our latest analysis for Forward Air

How Quickly Is Forward Air Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Forward Air's EPS has grown 36% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Forward Air shareholders can take confidence from the fact that EBIT margins are up from 9.6% to 13%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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

Are Forward Air Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Despite US$1.0m worth of sales, Forward Air insiders have overwhelmingly been buying the stock, spending US$1.3m on purchases in the last twelve months. An optimistic sign for those with Forward Air in their watchlist. It is also worth noting that it was Independent Director Scott Niswonger who made the biggest single purchase, worth US$902k, paying US$90.15 per share.

On top of the insider buying, it's good to see that Forward Air insiders have a valuable investment in the business. To be specific, they have US$29m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 1.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because on our analysis the CEO, Tom Schmitt, is paid less than the median for similar sized companies. For companies with market capitalisations between US$2.0b and US$6.4b, like Forward Air, the median CEO pay is around US$6.8m.

The Forward Air CEO received US$6.1m in compensation for the year ending December 2022. 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.

Should You Add Forward Air To Your Watchlist?

For growth investors, Forward Air's raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. If you think Forward Air might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Forward Air, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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