It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Skellerup Holdings (NZSE:SKL). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
Check out our latest analysis for Skellerup Holdings
How Fast Is Skellerup Holdings Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. We can see that in the last three years Skellerup Holdings grew its EPS by 15% per year. That's a good rate of growth, if it can be sustained.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Skellerup Holdings's EBIT margins were flat over the last year, revenue grew by a solid 11% to NZ$293m. 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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Skellerup Holdings EPS 100% free.
Are Skellerup Holdings Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Skellerup Holdings insiders have a significant amount of capital invested in the stock. To be specific, they have NZ$37m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 3.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.