The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Connexion Mobility (ASX:CXZ). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Connexion Mobility
Connexion Mobility's 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. Impressively, Connexion Mobility has grown EPS by 27% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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 Connexion Mobility is growing revenues, and EBIT margins improved by 18.5 percentage points to 30%, over the last year. Ticking those two boxes is a good sign of growth, in our book.
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 Connexion Mobility is no giant, with a market capitalisation of AU$19m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Connexion Mobility Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We haven't seen any insiders selling Connexion Mobility shares, in the last year. With that in mind, it's heartening that Aaryn Nania, the MD, CEO & Director of the company, paid US$65k for shares at around US$0.018 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.