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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. 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. 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 Genesis Land Development (TSE:GDC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Genesis Land Development with the means to add long-term value to shareholders.
View our latest analysis for Genesis Land Development
Genesis Land Development's 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. Commendations have to be given in seeing that Genesis Land Development grew its EPS from CA$0.17 to CA$0.62, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Genesis Land Development shareholders can take confidence from the fact that EBIT margins are up from 7.4% to 15%, and revenue is growing. 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.
Genesis Land Development isn't a huge company, given its market capitalisation of CA$193m. That makes it extra important to check on its balance sheet strength.
Are Genesis Land Development Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Genesis Land Development followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have CA$38m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 20% of the company; visible skin in the game.