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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Lifeway Foods (NASDAQ:LWAY). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Lifeway Foods with the means to add long-term value to shareholders.
See our latest analysis for Lifeway Foods
How Fast Is Lifeway Foods Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Impressively, Lifeway Foods has grown EPS by 29% 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.
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. The music to the ears of Lifeway Foods shareholders is that EBIT margins have grown from 0.6% to 8.6% in the last 12 months and revenues are on an upwards trend as well. 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 Lifeway Foods is no giant, with a market capitalisation of US$138m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Lifeway Foods Insiders Aligned With All Shareholders?
Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Lifeway Foods insiders own a significant number of shares certainly is appealing. Actually, with 44% of the company to their names, insiders are profoundly invested in the business. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. With that sort of holding, insiders have about US$60m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!