In This Article:
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.
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 HUB24 (ASX:HUB). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
View our latest analysis for HUB24
How Quickly Is HUB24 Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, HUB24 has achieved impressive annual EPS growth of 55%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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. Not all of HUB24's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note HUB24 achieved similar EBIT margins to last year, revenue grew by a solid 20% to AU$296m. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of HUB24's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are HUB24 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 HUB24 shares worth a considerable sum. Notably, they have an enviable stake in the company, worth AU$172m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!