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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 currently lacks a track record of revenue and profit. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 NTG Clarity Networks (CVE:NCI). 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 NTG Clarity Networks
How Quickly Is NTG Clarity Networks Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. NTG Clarity Networks' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 56%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note NTG Clarity Networks achieved similar EBIT margins to last year, revenue grew by a solid 76% to CA$39m. 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.
Since NTG Clarity Networks is no giant, with a market capitalisation of CA$55m, you should definitely check its cash and debt before getting too excited about its prospects.
Are NTG Clarity Networks 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Despite CA$619k worth of sales, NTG Clarity Networks insiders have overwhelmingly been buying the stock, spending CA$1.3m on purchases in the last twelve months. An optimistic sign for those with NTG Clarity Networks in their watchlist. It is also worth noting that it was Founder Ashraf Zaghloul who made the biggest single purchase, worth CA$975k, paying CA$0.15 per share.