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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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Aflac (NYSE:AFL). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Aflac's Earnings Per Share Are Growing
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Aflac grew its EPS by 17% per year. That growth rate is fairly good, assuming the company can keep it up.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Our analysis has highlighted that Aflac's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While revenue is looking a bit flat, the good news is EBIT margins improved by 5.8 percentage points to 35%, in the last twelve months. Which is a great look for the company.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
View our latest analysis for Aflac
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Aflac's future EPS 100% free.
Are Aflac Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$59b company like Aflac. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$468m. While that is a lot of skin in the game, we note this holding only totals to 0.8% of the business, which is a result of the company being so large. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.