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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.'
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Career Point (NSE:CAREERP). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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 Career Point
Career Point's Earnings Per Share Are Growing.
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Career Point has grown EPS by 22% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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 Career Point is growing revenues, and EBIT margins improved by 7.1 percentage points to 36%, over the last year. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since Career Point is no giant, with a market capitalization of ₹1.7b, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Career Point Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.
Like a sturdy phalanx Career Point insiders have stood united by refusing to sell shares over the last year. But my excitement comes from the ₹13m that Founder Pramod Maheshwari spent buying shares (at an average price of about ₹67.85).
On top of the insider buying, we can also see that Career Point insiders own a large chunk of the company. In fact, they own 70% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. In terms of absolute value, insiders have ₹1.2b invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!