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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like MoneyMax Financial Services (Catalist:5WJ). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for MoneyMax Financial Services
How Fast Is MoneyMax Financial Services Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. MoneyMax Financial Services' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 37%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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. EBIT margins for MoneyMax Financial Services remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 27% to S$253m. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
MoneyMax Financial Services isn't a huge company, given its market capitalisation of S$91m. That makes it extra important to check on its balance sheet strength.
Are MoneyMax Financial Services 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. Shareholders will be pleased by the fact that insiders own MoneyMax Financial Services shares worth a considerable sum. To be specific, they have S$26m worth of shares. This considerable investment should help drive long-term value in the business. Those holdings account for over 29% of the company; visible skin in the game.