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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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Mazarin (CVE:MAZ.H). 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.
Check out our latest analysis for Mazarin
How Fast Is Mazarin Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Mazarin's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 48%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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. Our analysis has highlighted that Mazarin's revenue from operations did not account for all of their revenue last year, so our analysis of its margins might not accurately reflect the underlying business. The good news is that Mazarin is growing revenues, and EBIT margins improved by 44.5 percentage points to 24%, over the last year. Ticking those two boxes is a good sign of growth, in our book.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since Mazarin is no giant, with a market capitalisation of CA$5.5m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Mazarin Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.