The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like IPH (ASX:IPH). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for IPH
How Fast Is IPH Growing Its Earnings Per Share?
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. It's good to see that IPH's EPS has grown from AU$0.24 to AU$0.27 over twelve months. That's a 13% gain; respectable growth in the broader scheme of things.
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. IPH maintained stable EBIT margins over the last year, all while growing revenue 29% to AU$483m. That's progress.
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.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for IPH's future profits.
Are IPH Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
The first bit of good news is that no IPH insiders reported share sales in the last twelve months. Even better, though, is that the Non-Executive Chairman, Peter Warne, bought a whopping AU$347k worth of shares, paying about AU$8.68 per share, on average. Big buys like that may signal an opportunity; actions speak louder than words.