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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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Linamar (TSE:LNR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Linamar with the means to add long-term value to shareholders.
Check out our latest analysis for Linamar
Linamar'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) outcomes. That makes EPS growth an attractive quality for any company. We can see that in the last three years Linamar grew its EPS by 9.3% per year. That growth rate is fairly good, assuming the company can keep it up.
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. EBIT margins for Linamar remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to CA$11b. That's a real positive.
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.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Linamar's future profits.
Are Linamar Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Although we did see some insider selling (worth CA$877k) this was overshadowed by a mountain of buying, totalling CA$3.1m in just one year. We find this encouraging because it suggests they are optimistic about Linamar'sfuture. Zooming in, we can see that the biggest insider purchase was by Executive Chairman of the Board Linda Hasenfratz for CA$2.9m worth of shares, at about CA$57.89 per share.