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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In contrast to all that, I prefer to spend time on companies like WiseTech Global (ASX:WTC), which has not only revenues, but also profits. 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. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
Check out our latest analysis for WiseTech Global
How Fast Is WiseTech Global Growing Its Earnings Per Share?
In the last three years WiseTech Global's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, WiseTech Global's EPS shot from AU$0.18 to AU$0.50, over the last year. Year on year growth of 184% is certainly a sight to behold.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While WiseTech Global did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future my hold further growth, especially if EBIT margins can stabilize.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of WiseTech Global's forecast profits?
Are WiseTech Global Insiders Aligned With All Shareholders?
Since WiseTech Global has a market capitalization of AU$11b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth AU$1.9b. That equates to 18% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between AU$5.5b and AU$16b, like WiseTech Global, the median CEO pay is around AU$3.3m.