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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 completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Academies Australasia Group (ASX:AKG). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
View our latest analysis for Academies Australasia Group
How Fast Is Academies Australasia Group Growing Its Earnings Per Share?
In the last three years Academies Australasia Group'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. Thus, it makes sense to focus on more recent growth rates, instead. Academies Australasia Group boosted its trailing twelve month EPS from AU$0.033 to AU$0.037, in the last year. I doubt many would complain about that 11% gain.
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. The good news is that Academies Australasia Group is growing revenues, and EBIT margins improved by 2.5 percentage points to 12%, over the last year. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.
Academies Australasia Group isn't a huge company, given its market capitalization of AU$87m. That makes it extra important to check on its balance sheet strength.
Are Academies Australasia Group Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
It's good to see Academies Australasia Group insiders walking the walk, by spending AU$647k 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. We also note that it was the Group MD, Christopher Campbell, who made the biggest single acquisition, paying AU$142k for shares at about AU$0.57 each.