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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 completely 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.'
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like BATM Advanced Communications (LON:BVC). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
View our latest analysis for BATM Advanced Communications
BATM Advanced Communications's Improving Profits
In the last three years BATM Advanced Communications's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a wedge-tailed eagle on the wind, BATM Advanced Communications's EPS soared from US$0.0036 to US$0.0059, in just one year. That's a commendable gain of 63%.
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. While revenue is looking a bit flat, the good news is EBIT margins improved by 2.3 percentage points to 1.9%, in the last twelve months. That's a real positive.
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.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for BATM Advanced Communications.
Are BATM Advanced Communications Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that BATM Advanced Communications insiders have a significant amount of capital invested in the stock. With a whopping US$46m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 23% of the stock on issue, thus making insiders influential, and aligned, owners of the business.