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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.' 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 5N Plus (TSE:VNP), which has not only revenues, but also profits. 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 5N Plus
How Fast Is 5N Plus Growing Its Earnings Per Share?
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that 5N Plus grew its EPS from US$0.056 to US$0.18, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. 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 music to the ears of 5N Plus shareholders is that EBIT margins have grown from 8.0% to 11% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of 5N Plus' forecast profits?
Are 5N Plus Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Even though some insiders sold down their holdings, their actions speak louder than words with US$997k more invested than sold by people who know they company best. An optimistic sign for those with 5N Plus in their watchlist. It is also worth noting that it was Independent Chairman Luc Bertrand who made the biggest single purchase, worth CA$545k, paying CA$6.01 per share.