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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Splendid Medien (ETR:SPM). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Splendid Medien
How Fast Is Splendid Medien Growing Its Earnings Per Share?
In the last three years Splendid Medien's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, Splendid Medien's EPS catapulted from €0.24 to €0.46, over the last year. It's a rarity to see 96% year-on-year growth like that.
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. We note that while EBIT margins have improved from 5.5% to 8.3%, the company has actually reported a fall in revenue by 2.3%. While not disastrous, these figures could be better.
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.
Splendid Medien isn't a huge company, given its market capitalisation of €14m. That makes it extra important to check on its balance sheet strength.
Are Splendid Medien Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So those who are interested in Splendid Medien will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 63% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only €14m Splendid Medien is really small for a listed company. So despite a large proportional holding, insiders only have €9.0m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.