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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. 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.
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 Dropbox (NASDAQ:DBX). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for Dropbox
How Fast Is Dropbox Growing Its Earnings Per Share?
Over the last three years, Dropbox has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Dropbox's EPS skyrocketed from US$0.91 to US$1.51, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 65%.
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. While we note Dropbox achieved similar EBIT margins to last year, revenue grew by a solid 7.7% to US$2.4b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Dropbox's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Dropbox Insiders Aligned With All Shareholders?
Owing to the size of Dropbox, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$2.4b. This totals to 26% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Very encouraging.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Dropbox, with market caps between US$4.0b and US$12b, is around US$8.1m.