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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Azeus Systems Holdings (SGX:BBW), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Azeus Systems Holdings with the means to add long-term value to shareholders.
See our latest analysis for Azeus Systems Holdings
Azeus Systems Holdings' Earnings Per Share Are Growing
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Azeus Systems Holdings' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 46%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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 Azeus Systems Holdings did well to grow revenue over the last year, EBIT margins were dampened at the same time. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Azeus Systems Holdings isn't a huge company, given its market capitalisation of S$246m. That makes it extra important to check on its balance sheet strength.
Are Azeus Systems Holdings Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Azeus Systems Holdings insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at HK$77m, they have plenty of motivation to push the business to succeed. That holding amounts to 31% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.