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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Cerillion (LON:CER). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Cerillion with the means to add long-term value to shareholders.
Check out our latest analysis for Cerillion
How Fast Is Cerillion Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Cerillion's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 48%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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 music to the ears of Cerillion shareholders is that EBIT margins have grown from 36% to 41% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Cerillion?
Are Cerillion Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Cerillion insiders have a significant amount of capital invested in the stock. We note that their impressive stake in the company is worth UK£160m. Coming in at 31% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Cerillion with market caps between UK£310m and UK£1.2b is about UK£1.1m.