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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Imperial Brands (LON:IMB). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for Imperial Brands
How Fast Is Imperial Brands Growing Its Earnings Per Share?
Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. Imperial Brands' EPS has risen over the last 12 months, growing from UK£2.52 to UK£3.14. This amounts to a 25% gain; a figure that shareholders will be pleased to see.
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. While we note Imperial Brands achieved similar EBIT margins to last year, revenue grew by a solid 2.3% to UK£18b. That's encouraging news for the company!
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Imperial Brands' forecast profits?
Are Imperial Brands Insiders Aligned With All Shareholders?
Owing to the size of Imperial Brands, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at UK£1.6b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.
Should You Add Imperial Brands To Your Watchlist?
As previously touched on, Imperial Brands is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. We should say that we've discovered 3 warning signs for Imperial Brands (1 is significant!) that you should be aware of before investing here.