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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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Lycopodium (ASX:LYL). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
Check out our latest analysis for Lycopodium
Lycopodium's Improving Profits
Over the last three years, Lycopodium 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. Thus, it makes sense to focus on more recent growth rates, instead. Like a falcon taking flight, Lycopodium's EPS soared from AU$0.31 to AU$0.49, over the last year. That's a commendable gain of 56%.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Lycopodium's EBIT margins have actually improved by 9.3 percentage points in the last year, to reach 17%, but, on the flip side, revenue was down 14%. That falls short of ideal.
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 Lycopodium's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Lycopodium Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Lycopodium insiders own a meaningful share of the business. Actually, with 36% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. With that sort of holding, insiders have about AU$69m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!