Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Supply Network (ASX:SNL). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Supply Network
How Quickly Is Supply Network 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. To the delight of shareholders, Supply Network has achieved impressive annual EPS growth of 41%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Supply Network remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 27% to AU$252m. That's a real positive.
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.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Supply Network's balance sheet strength, before getting too excited.
Are Supply Network Insiders Aligned With All Shareholders?
Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Supply Network insiders own a significant number of shares certainly is appealing. In fact, they own 49% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. With that sort of holding, insiders have about AU$292m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!