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The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Singapore Exchange (SGX:S68). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Singapore Exchange with the means to add long-term value to shareholders.
See our latest analysis for Singapore Exchange
Singapore Exchange'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) outcomes. That makes EPS growth an attractive quality for any company. Singapore Exchange managed to grow EPS by 10% per year, over three years. That's a pretty good rate, if the company can sustain it.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Singapore Exchange maintained stable EBIT margins over the last year, all while growing revenue 3.1% to S$1.2b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
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 Singapore Exchange.
Are Singapore Exchange Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a S$13b company like Singapore Exchange. But we do take comfort from the fact that they are investors in the company. Holding S$109m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This would indicate that the goals of shareholders and management are one and the same.
Does Singapore Exchange Deserve A Spot On Your Watchlist?
One important encouraging feature of Singapore Exchange is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of Singapore Exchange. You might benefit from giving it a glance today.