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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Good Times Restaurants (NASDAQ:GTIM). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
Check out our latest analysis for Good Times Restaurants
Good Times Restaurants's Improving Profits
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. It is therefore awe-striking that Good Times Restaurants's EPS went from US$0.28 to US$1.05 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?
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. On the one hand, Good Times Restaurants's EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future my hold further growth, especially if EBIT margins can stabilize.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Since Good Times Restaurants is no giant, with a market capitalization of US$39m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Good Times Restaurants Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
In the last twelve months Good Times Restaurants insiders spent US$8.4k on stock; good news for shareholders. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. It is also worth noting that it was Independent Director Jennifer Stetson who made the biggest single purchase, worth US$4.6k, paying US$4.24 per share.