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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. 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. 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.
In contrast to all that, many investors prefer to focus on companies like Avingtrans (LON:AVG), 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.
View our latest analysis for Avingtrans
Avingtrans' Improving Profits
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. Which is why EPS growth is looked upon so favourably. It's an outstanding feat for Avingtrans to have grown EPS from UK£0.055 to UK£0.19 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Avingtrans is growing revenues, and EBIT margins improved by 3.9 percentage points to 6.8%, 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.
Fortunately, we've got access to analyst forecasts of Avingtrans' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Avingtrans Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Avingtrans insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at UK£16m. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 11% of the shares on issue for the business, an appreciable amount considering the market cap.
While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Avingtrans with market caps between UK£86m and UK£346m is about UK£617k.