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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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in GeoPark (NYSE:GPRK). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
See our latest analysis for GeoPark
How Fast Is GeoPark Growing Its Earnings Per Share?
Over the last three years, GeoPark has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that GeoPark's EPS has grown from US$2.86 to US$3.28 over twelve months. That's a 15% gain; respectable growth in the broader scheme of things. We should also note that the company has boosted EPS by buying back shares, showing the strength of its balance sheet.
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. We note that while EBIT margins have improved from 37% to 43%, the company has actually reported a fall in revenue by 8.8%. While not disastrous, these figures could be better.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of GeoPark's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are GeoPark 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 GeoPark insiders have a significant amount of capital invested in the stock. Holding US$85m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. At 16% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.