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Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In contrast to all that, I prefer to spend time on companies like JD Sports Fashion (LON:JD.), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
View our latest analysis for JD Sports Fashion
How Fast Is JD Sports Fashion Growing Its Earnings Per Share?
In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that JD Sports Fashion grew its EPS from UK£0.039 to UK£0.40, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that JD Sports Fashion is growing revenues, and EBIT margins improved by 4.5 percentage points to 12%, 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. To see the actual numbers, click on the chart.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for JD Sports Fashion's future profits.
Are JD Sports Fashion Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The first bit of good news is that no JD Sports Fashion insiders reported share sales in the last twelve months. But the really good news is that Executive Chairman Peter Cowgill spent UK£431k buying stock stock, at an average price of around UK£1.72. To me that means at least one insider thinks that the company is doing well - and they are backing that view with cash.