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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 VICOM (SGX:WJP). 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.
Our free stock report includes 1 warning sign investors should be aware of before investing in VICOM. Read for free now.
VICOM's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. VICOM managed to grow EPS by 5.7% per year, over three years. While that sort of growth rate isn't anything to write home about, it does show the business is growing.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for VICOM remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.8% to S$119m. That's progress.
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 VICOM
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are VICOM Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that VICOM insiders have a significant amount of capital invested in the stock. Indeed, they hold S$24m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 4.9% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to VICOM, with market caps between S$259m and S$1.0b, is around S$1.1m.