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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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in SDI (ASX:SDI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for SDI
SDI's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Over the last three years, SDI has grown EPS by 5.2% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.
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 music to the ears of SDI shareholders is that EBIT margins have grown from 9.2% to 16% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
SDI isn't a huge company, given its market capitalisation of AU$111m. That makes it extra important to check on its balance sheet strength.
Are SDI Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We haven't seen any insiders selling SDI shares, in the last year. So it's definitely nice that CFO, COO John Slaviero bought AU$26k worth of shares at an average price of around AU$0.82. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.