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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.
In contrast to all that, many investors prefer to focus on companies like Grand Banks Yachts (SGX:G50), which has not only revenues, but also profits. 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 Grand Banks Yachts
Grand Banks Yachts' Improving Profits
In the last three years Grand Banks Yachts' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Grand Banks Yachts' EPS shot up from S$0.045 to S$0.073; a result that's bound to keep shareholders happy. That's a commendable gain of 62%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Grand Banks Yachts shareholders can take confidence from the fact that EBIT margins are up from 9.0% to 16%, and revenue is growing. 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. To see the actual numbers, click on the chart.
Since Grand Banks Yachts is no giant, with a market capitalisation of S$81m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Grand Banks Yachts 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 we're pleased to report that Grand Banks Yachts insiders own a meaningful share of the business. Actually, with 39% of the company to their names, insiders are profoundly invested in the business. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. To give you an idea, the value of insiders' holdings in the business are valued at S$32m at the current share price. That's nothing to sneeze at!