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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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like StarHub (SGX:CC3), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide StarHub with the means to add long-term value to shareholders.
StarHub's Improving Profits
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's no surprise that some investors are more inclined to invest in profitable businesses. StarHub has grown its trailing twelve month EPS from S$0.082 to S$0.089, in the last year. That's a modest gain of 8.1%.
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. StarHub reported flat revenue and EBIT margins over the last year. That's not bad, but it doesn't point to ongoing future growth, either.
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.
Check out our latest analysis for StarHub
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for StarHub's future EPS 100% free.
Are StarHub 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. StarHub followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have S$22m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.