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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like SG Fleet Group (ASX:SGF). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for SG Fleet Group
How Fast Is SG Fleet Group Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years SG Fleet Group grew its EPS by 17% per year. That growth rate is fairly good, assuming the company can keep it up.
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. SG Fleet Group maintained stable EBIT margins over the last year, all while growing revenue 16% to AU$1.1b. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of SG Fleet Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are SG Fleet Group Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that SG Fleet Group insiders have a significant amount of capital invested in the stock. To be specific, they have AU$28m worth of shares. This considerable investment should help drive long-term value in the business. Despite being just 3.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.