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. 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 Energiedienst Holding (VTX:EDHN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Energiedienst Holding with the means to add long-term value to shareholders.
Check out our latest analysis for Energiedienst Holding
How Fast Is Energiedienst Holding Growing Its Earnings Per Share?
In the last three years Energiedienst Holding's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Impressively, Energiedienst Holding's EPS catapulted from €2.13 to €3.95, over the last year. It's a rarity to see 85% year-on-year growth like that. The best case scenario? That the business has hit a true inflection point.
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 music to the ears of Energiedienst Holding shareholders is that EBIT margins have grown from 6.7% to 10% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Energiedienst Holding's balance sheet strength, before getting too excited.
Are Energiedienst Holding Insiders Aligned With All Shareholders?
Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. Our analysis has discovered that the median total compensation for the CEOs of companies like Energiedienst Holding with market caps between €943m and €3.0b is about €1.2m.