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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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
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 Kinaxis (TSE:KXS). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Kinaxis
Kinaxis' Improving Profits
Over the last three years, Kinaxis has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Kinaxis' EPS soared from US$0.52 to US$0.73, over the last year. That's a impressive gain of 40%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Kinaxis remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to US$471m. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Kinaxis' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Kinaxis Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own Kinaxis shares worth a considerable sum. To be specific, they have US$61m worth of shares. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 1.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.