In This Article:
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Livestock Improvement (NZSE:LIC). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
See our latest analysis for Livestock Improvement
Livestock Improvement's Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Livestock Improvement has grown EPS by 33% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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. While we note Livestock Improvement's EBIT margins were flat over the last year, revenue grew by a solid 3.4% to NZ$249m. That's a real positive.
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.
Livestock Improvement isn't a huge company, given its market capitalization of NZ$174m. That makes it extra important to check on its balance sheet strength.
Are Livestock Improvement Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Livestock Improvement top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the , David Jensen, paid NZ$79k to buy shares at an average price of NZ$0.79.
Does Livestock Improvement Deserve A Spot On Your Watchlist?
You can't deny that Livestock Improvement has grown its earnings per share at a very impressive rate. That's attractive. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. So on this analysis I believe Livestock Improvement is probably worth spending some time on. Even so, be aware that Livestock Improvement is showing 1 warning sign in our investment analysis , you should know about...