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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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
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 Orbital (ASX:OEC). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Orbital
Orbital's Improving Profits
Orbital has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Orbital's EPS catapulted from AU$0.00019 to AU$0.00046, over the last year. It's not often a company can achieve year-on-year growth of 141%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Unfortunately, revenue is down and so are margins. Shareholders will be hoping for a change in fortunes if they're looking for profit growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Orbital isn't a huge company, given its market capitalisation of AU$21m. That makes it extra important to check on its balance sheet strength.
Are Orbital Insiders Aligned With All Shareholders?
Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalisations under AU$292m, like Orbital, the median CEO pay is around AU$457k.
Orbital offered total compensation worth AU$384k to its CEO in the year to June 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.