In This Article:
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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 ReadyTech Holdings (ASX:RDY). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
View our latest analysis for ReadyTech Holdings
ReadyTech Holdings's Improving Profits
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Like a wedge-tailed eagle on the wind, ReadyTech Holdings's EPS soared from AU$0.039 to AU$0.062, in just one year. That's a commendable gain of 57%.
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. ReadyTech Holdings shareholders can take confidence from the fact that EBIT margins are up from 9.6% to 13%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future ReadyTech Holdings EPS 100% free.
Are ReadyTech Holdings Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.
It's good to see ReadyTech Holdings insiders walking the walk, by spending AU$590k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. Zooming in, we can see that the biggest insider purchase was by Alternate Non-Executive Director Mark Summerhayes for AU$208k worth of shares, at about AU$1.80 per share.