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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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Yorkton Equity Group (CVE:YEG), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Yorkton Equity Group with the means to add long-term value to shareholders.
View our latest analysis for Yorkton Equity Group
How Fast Is Yorkton Equity Group Growing Its Earnings Per Share?
In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It's an outstanding feat for Yorkton Equity Group to have grown EPS from CA$0.00051 to CA$0.031 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
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. It's noted that Yorkton Equity Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that Yorkton Equity Group is growing revenues, and EBIT margins improved by 14.8 percentage points to 49%, over the last year. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Since Yorkton Equity Group is no giant, with a market capitalisation of CA$20m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Yorkton Equity Group Insiders Aligned With All Shareholders?
Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Yorkton Equity Group insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 74%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Of course, Yorkton Equity Group is a very small company, with a market cap of only CA$20m. So this large proportion of shares owned by insiders only amounts to CA$15m. That might not be a huge sum but it should be enough to keep insiders motivated!