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. 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.
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 Burckhardt Compression Holding (VTX:BCHN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Burckhardt Compression Holding with the means to add long-term value to shareholders.
View our latest analysis for Burckhardt Compression Holding
Burckhardt Compression Holding's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Burckhardt Compression Holding has grown EPS by 27% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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 Burckhardt Compression Holding remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 18% to CHF982m. 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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Burckhardt Compression Holding's future EPS 100% free.
Are Burckhardt Compression Holding Insiders Aligned With All Shareholders?
As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to Burckhardt Compression Holding, with market caps between CHF847m and CHF2.7b, is around CHF1.2m.