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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
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 Woolworths Holdings (JSE:WHL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Woolworths Holdings with the means to add long-term value to shareholders.
Check out our latest analysis for Woolworths Holdings
How Fast Is Woolworths Holdings Growing Its Earnings Per Share?
Over the last three years, Woolworths Holdings 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. As a result, we'll zoom in on growth over the last year, instead. Woolworths Holdings' EPS has risen over the last 12 months, growing from R3.65 to R4.29. This amounts to a 18% gain; a figure that shareholders will be pleased to see.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Woolworths Holdings maintained stable EBIT margins over the last year, all while growing revenue 10% to R72b. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. 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 Woolworths Holdings' future profits.
Are Woolworths Holdings 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. Woolworths Holdings followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold R365m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.6%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.