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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.'
So if you're like me, you might be more interested in profitable, growing companies, like Aditya Birla Fashion and Retail (NSE:ABFRL). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.
See our latest analysis for Aditya Birla Fashion and Retail
Aditya Birla Fashion and Retail's Improving Profits
In the last three years Aditya Birla Fashion and Retail's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Aditya Birla Fashion and Retail's EPS shot from ₹1.52 to ₹4.15, over the last year. Year on year growth of 172% is certainly a sight to behold.
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. Aditya Birla Fashion and Retail maintained stable EBIT margins over the last year, all while growing revenue 13% to ₹81b. That's progress.
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.
Fortunately, we've got access to analyst forecasts of Aditya Birla Fashion and Retail's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Aditya Birla Fashion and Retail Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Aditya Birla Fashion and Retail shares worth a considerable sum. Indeed, they hold ₹1.3b worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.8% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.