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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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Madison Square Garden Sports (NYSE:MSGS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Madison Square Garden Sports with the means to add long-term value to shareholders.
Check out our latest analysis for Madison Square Garden Sports
Madison Square Garden Sports' Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Madison Square Garden Sports has grown EPS by 9.1% per year. 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. The good news is that Madison Square Garden Sports is growing revenues, and EBIT margins improved by 3.0 percentage points to 15%, over the last year. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Madison Square Garden Sports?
Are Madison Square Garden Sports Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$5.3b company like Madison Square Garden Sports. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$142m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.