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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In contrast to all that, I prefer to spend time on companies like LPKF Laser & Electronics (ETR:LPK), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Check out our latest analysis for LPKF Laser & Electronics
How Fast Is LPKF Laser & Electronics Growing Its Earnings Per Share?
Over the last three years, LPKF Laser & Electronics has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, LPKF Laser & Electronics's EPS shot from €0.23 to €0.53, over the last year. You don't see 131% year-on-year growth like that, very often.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that LPKF Laser & Electronics is growing revenues, and EBIT margins improved by 6 percentage points to 12%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of LPKF Laser & Electronics's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are LPKF Laser & Electronics Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own LPKF Laser & Electronics shares worth a considerable sum. To be specific, they have €23m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 11% of the company; visible skin in the game.