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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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Property For Industry (NZSE:PFI). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.
View our latest analysis for Property For Industry
Property For Industry's Earnings Per Share Are Growing.
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Property For Industry managed to grow EPS by 8.6% per year, over three years. That's a good rate of growth, if it can be sustained.
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. Property For Industry maintained stable EBIT margins over the last year, all while growing revenue 9.5% to NZ$90m. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Property For Industry's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Property For Industry Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Property For Industry insiders have a significant amount of capital invested in the stock. To be specific, they have NZ$32m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 3.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.