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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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Origin Energy (ASX:ORG). 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 Origin Energy
How Fast Is Origin Energy Growing Its Earnings Per Share?
Origin Energy has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Origin Energy's EPS shot up from AU$0.61 to AU$0.81; a result that's bound to keep shareholders happy. That's a impressive gain of 33%.
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. We note that while EBIT margins have improved from 1.6% to 5.9%, the company has actually reported a fall in revenue by 2.1%. That's not a good look.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
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 Origin Energy's future EPS 100% free.
Are Origin Energy Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a AU$18b company like Origin Energy. But we are reassured by the fact they have invested in the company. To be specific, they have AU$36m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.