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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. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Soilbuild Construction Group (SGX:V5Q). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
See our latest analysis for Soilbuild Construction Group
Soilbuild Construction Group's Improving Profits
Over the last three years, Soilbuild Construction Group 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. Impressively, Soilbuild Construction Group's EPS catapulted from S$0.055 to S$0.16, over the last year. Year on year growth of 191% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Soilbuild Construction Group shareholders can take confidence from the fact that EBIT margins are up from 2.2% to 7.3%, and revenue is growing. 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 Soilbuild Construction Group is no giant, with a market capitalisation of S$138m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Soilbuild Construction Group Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So those who are interested in Soilbuild Construction Group will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 89% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. With that sort of holding, insiders have about S$123m riding on the stock, at current prices. So there's plenty there to keep them focused!