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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
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 PhenixFIN (NASDAQ:PFX). 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.
See our latest analysis for PhenixFIN
How Quickly Is PhenixFIN Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, PhenixFIN has achieved impressive annual EPS growth of 41%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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. It's noted that PhenixFIN's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. On the one hand, PhenixFIN's EBIT margins fell over the last year, but on the other hand, revenue grew. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
PhenixFIN isn't a huge company, given its market capitalisation of US$94m. That makes it extra important to check on its balance sheet strength.
Are PhenixFIN 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.