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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 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Adtalem Global Education (NYSE:ATGE). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Adtalem Global Education's Improving Profits
Adtalem Global Education 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. In impressive fashion, Adtalem Global Education's EPS grew from US$2.87 to US$5.51, over the previous 12 months. Year on year growth of 92% is certainly a sight to behold.
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. Adtalem Global Education shareholders can take confidence from the fact that EBIT margins are up from 16% to 19%, and revenue is growing. Both of which are great metrics to check off for potential growth.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Check out our latest analysis for Adtalem Global Education
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Adtalem Global Education ?
Are Adtalem Global Education Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Adtalem Global Education shares worth a considerable sum. With a whopping US$60m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.