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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Halmont Properties (CVE:HMT). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Halmont Properties
Halmont Properties' Improving Profits
In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It is awe-striking that Halmont Properties' EPS went from CA$0.045 to CA$0.15 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that Halmont Properties' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that Halmont Properties is growing revenues, and EBIT margins improved by 4.3 percentage points to 90%, over the last year. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Halmont Properties isn't a huge company, given its market capitalisation of CA$93m. That makes it extra important to check on its balance sheet strength.
Are Halmont Properties 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 Halmont Properties insiders have a significant amount of capital invested in the stock. Indeed, they hold CA$19m worth of its stock. This considerable investment should help drive long-term value in the business. Those holdings account for over 21% of the company; visible skin in the game.