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Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. 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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Credit Corp Group (ASX:CCP). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
See our latest analysis for Credit Corp Group
How Fast Is Credit Corp Group Growing?
As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Credit Corp Group has managed to grow EPS by 19% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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. I note that Credit Corp Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Credit Corp Group's EBIT margins were flat over the last year, revenue grew by a solid 8.0% to AU$265m. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Credit Corp Group's future profits.
Are Credit Corp Group Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Credit Corp Group shares worth a considerable sum. Indeed, they hold AU$17m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 1.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.