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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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Aussie Broadband (ASX:ABB). 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 Aussie Broadband
Aussie Broadband's Improving Profits
In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that Aussie Broadband's EPS went from AU$0.024 to AU$0.091 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.
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. The good news is that Aussie Broadband is growing revenues, and EBIT margins improved by 2.2 percentage points to 5.0%, over the last year. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
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 Aussie Broadband's future profits.
Are Aussie Broadband 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. Shareholders will be pleased by the fact that insiders own Aussie Broadband shares worth a considerable sum. Given insiders own a significant chunk of shares, currently valued at AU$131m, they have plenty of motivation to push the business to succeed. That holding amounts to 13% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.