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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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
In contrast to all that, many investors prefer to focus on companies like Headwater Exploration (TSE:HWX), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Headwater Exploration with the means to add long-term value to shareholders.
See our latest analysis for Headwater Exploration
How Fast Is Headwater Exploration Growing Its Earnings Per Share?
Over the last three years, Headwater Exploration has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Headwater Exploration boosted its trailing twelve month EPS from CA$0.64 to CA$0.78, in the last year. There's little doubt shareholders would be happy with that 21% gain.
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 Headwater Exploration achieved similar EBIT margins to last year, revenue grew by a solid 20% to CA$490m. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
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 Headwater Exploration's future EPS 100% free.
Are Headwater Exploration Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own Headwater Exploration shares worth a considerable sum. With a whopping CA$110m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.