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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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. 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 Lloyds Banking Group (LON:LLOY). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Lloyds Banking Group with the means to add long-term value to shareholders.
Check out our latest analysis for Lloyds Banking Group
How Fast Is Lloyds Banking Group Growing Its Earnings Per Share?
In the last three years Lloyds Banking Group's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Lloyds Banking Group's EPS shot up from UK£0.049 to UK£0.078; a result that's bound to keep shareholders happy. That's a commendable gain of 58%.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It's noted that Lloyds Banking Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Lloyds Banking Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 27% to UK£18b. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Lloyds Banking Group.
Are Lloyds Banking Group Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a UK£33b company like Lloyds Banking Group. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. To be specific, they have UK£22m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.07% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.