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Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
In contrast to all that, I prefer to spend time on companies like Billington Holdings (LON:BILN), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
Check out our latest analysis for Billington Holdings
Billington Holdings's Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Billington Holdings's EPS has grown 22% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Billington Holdings maintained stable EBIT margins over the last year, all while growing revenue 12% to UK£86m. That's progress.
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.
Billington Holdings isn't a huge company, given its market capitalization of UK£42m. That makes it extra important to check on its balance sheet strength.
Are Billington Holdings Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
In twelve months, insiders sold -UK£15.0k worth of Billington Holdings shares. On the other hand, Non-Executive Chairman Ian Lawson paid UK£52k for shares, at a price of about UK£3.01 per share. And that's a reason to be optimistic.
Does Billington Holdings Deserve A Spot On Your Watchlist?
For growth investors like me, Billington Holdings's raw rate of earnings growth is a beacon in the night. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. So on this analysis I believe Billington Holdings is probably worth spending some time on. Now, you could try to make up your mind on Billington Holdings by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.