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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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like New York Times (NYSE:NYT). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
How Fast Is New York Times Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. 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 New York Times grew its EPS by 11% 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. It's noted that New York Times' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for New York Times remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.7% to US$2.6b. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
View our latest analysis for New York Times
Fortunately, we've got access to analyst forecasts of New York Times' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting .
Are New York Times Insiders Aligned With All Shareholders?
Owing to the size of New York Times, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. To be specific, they have US$49m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 0.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.