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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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like K-Bro Linen (TSE:KBL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide K-Bro Linen with the means to add long-term value to shareholders.
K-Bro Linen's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that K-Bro Linen's EPS has grown 30% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. K-Bro Linen maintained stable EBIT margins over the last year, all while growing revenue 16% to CA$374m. 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.
Check out our latest analysis for K-Bro Linen
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 K-Bro Linen's future profits.
Are K-Bro Linen Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own K-Bro Linen shares worth a considerable sum. Indeed, they hold CA$18m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 4.8%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.