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Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
So if you're like me, you might be more interested in profitable, growing companies, like Galaxy Entertainment Group (HKG:27). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
See our latest analysis for Galaxy Entertainment Group
Galaxy Entertainment Group's Earnings Per Share Are Growing.
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Who among us would not applaud Galaxy Entertainment Group's stratospheric annual EPS growth of 47%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a glint in the eye of my lover.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Galaxy Entertainment Group's EBIT margins were flat over the last year, revenue grew by a solid 14% to HK$55b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Galaxy Entertainment Group's forecast profits?
Are Galaxy Entertainment Group Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a HK$228b company like Galaxy Entertainment Group. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth HK$26b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!