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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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 QBE Insurance Group (ASX:QBE), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for QBE Insurance Group
How Fast Is QBE Insurance Group Growing Its Earnings Per Share?
In the last three years QBE Insurance Group's 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. Impressively, QBE Insurance Group's EPS catapulted from US$0.60 to US$1.13, over the last year. It's not often a company can achieve year-on-year growth of 90%.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of QBE Insurance Group shareholders is that EBIT margins have grown from 4.9% to 12% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.
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.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for QBE Insurance Group.
Are QBE Insurance Group Insiders Aligned With All Shareholders?
Owing to the size of QBE Insurance Group, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Indeed, they hold US$25m worth of its stock. This considerable investment should help drive long-term value in the business. Even though that's only about 0.08% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.