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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. 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. 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 Babcock International Group (LON:BAB). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Babcock International Group with the means to add long-term value to shareholders.
View our latest analysis for Babcock International Group
Babcock International Group's Improving Profits
In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that Babcock International Group grew its EPS from UK£0.065 to UK£0.38, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement.
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 Babcock International Group achieved similar EBIT margins to last year, revenue grew by a solid 3.4% to UK£4.6b. That's encouraging news for the company!
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Babcock International Group's forecast profits?
Are Babcock International Group Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the real excitement comes from the UK£50k that Independent Non-Executive Director John Ramsay spent buying shares (at an average price of about UK£4.96). Strong buying like that could be a sign of opportunity.