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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in SRG Global (ASX:SRG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide SRG Global with the means to add long-term value to shareholders.
View our latest analysis for SRG Global
How Fast Is SRG Global Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. SRG Global's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 49%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note SRG Global achieved similar EBIT margins to last year, revenue grew by a solid 25% to AU$731m. That's progress.
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.
SRG Global isn't a huge company, given its market capitalisation of AU$379m. That makes it extra important to check on its balance sheet strength.
Are SRG Global Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own SRG Global shares worth a considerable sum. Indeed, they hold AU$28m worth of its stock. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 7.5% of the shares on issue for the business, an appreciable amount considering the market cap.
Does SRG Global Deserve A Spot On Your Watchlist?
SRG Global's earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, SRG Global is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You should always think about risks though. Case in point, we've spotted 2 warning signs for SRG Global you should be aware of.