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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. 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 Tidewater (NYSE:TDW). 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.
We check all companies for important risks. See what we found for Tidewater in our free report.
Tidewater's Improving Profits
Over the last three years, Tidewater has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Tidewater's EPS grew from US$1.88 to US$3.51, over the previous 12 months. It's a rarity to see 86% year-on-year growth like that. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.
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. Tidewater shareholders can take confidence from the fact that EBIT margins are up from 17% to 22%, and revenue is growing. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
View our latest analysis for Tidewater
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Tidewater's future profits.
Are Tidewater Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Tidewater followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. As a matter of fact, their holding is valued at US$29m. This considerable investment should help drive long-term value in the business. Even though that's only about 1.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.