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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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Sembcorp Industries (SGX:U96), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Sembcorp Industries with the means to add long-term value to shareholders.
Check out our latest analysis for Sembcorp Industries
How Fast Is Sembcorp Industries Growing Its Earnings Per Share?
In the last three years Sembcorp Industries' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Sembcorp Industries' EPS shot up from S$0.40 to S$0.57; a result that's bound to keep shareholders happy. That's a fantastic gain of 45%.
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. Sembcorp Industries' EBIT margins have actually improved by 5.5 percentage points in the last year, to reach 17%, but, on the flip side, revenue was down 10%. That's not a good look.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Sembcorp Industries' forecast profits?
Are Sembcorp Industries Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a S$9.0b company like Sembcorp Industries. But we are reassured by the fact they have invested in the company. Holding S$94m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.