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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like NexTier Oilfield Solutions (NYSE:NEX), which has not only revenues, but also profits. 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 NexTier Oilfield Solutions
NexTier Oilfield Solutions' 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's an outstanding feat for NexTier Oilfield Solutions to have grown EPS from US$0.18 to US$2.81 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. NexTier Oilfield Solutions shareholders can take confidence from the fact that EBIT margins are up from 3.5% to 16%, and revenue is growing. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for NexTier Oilfield Solutions' future EPS 100% free.
Are NexTier Oilfield Solutions 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. So it is good to see that NexTier Oilfield Solutions insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at US$70m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.