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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Oversea-Chinese Banking (SGX:O39). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Oversea-Chinese Banking
How Quickly Is Oversea-Chinese Banking 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. Over the last three years, Oversea-Chinese Banking has grown EPS by 16% per year. That growth rate is fairly good, assuming the company can keep it up.
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. Not all of Oversea-Chinese Banking'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. EBIT margins for Oversea-Chinese Banking remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.7% to S$14b. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Oversea-Chinese Banking's forecast profits?
Are Oversea-Chinese Banking Insiders Aligned With All Shareholders?
Since Oversea-Chinese Banking has a market capitalisation of S$78b, we wouldn't expect insiders to hold a large percentage of shares. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they have a considerable amount of wealth invested in it, currently valued at S$234m. We note that this amounts to 0.3% of the company, which may be small owing to the sheer size of Oversea-Chinese Banking but it's still worth mentioning. This should still be a great incentive for management to maximise shareholder value.