In This Article:
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.
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 Cairn Homes (LON:CRN). 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.
See our latest analysis for Cairn Homes
How Fast Is Cairn Homes Growing Its Earnings Per Share?
Over the last three years, Cairn Homes 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. As a result, we'll zoom in on growth over the last year, instead. Cairn Homes' EPS skyrocketed from €0.11 to €0.18, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 64%.
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. EBIT margins for Cairn Homes remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 36% to €813m. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Cairn Homes' forecast profits?
Are Cairn Homes 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. So it is good to see that Cairn Homes insiders have a significant amount of capital invested in the stock. To be specific, they have €26m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 2.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.