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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Ashtead Technology Holdings (LON:AT.). 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 Ashtead Technology Holdings
Ashtead Technology Holdings' Improving Profits
In the last three years Ashtead Technology Holdings' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Ashtead Technology Holdings' EPS shot up from UK£0.21 to UK£0.31; a result that's bound to keep shareholders happy. That's a impressive gain of 44%.
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. Ashtead Technology Holdings maintained stable EBIT margins over the last year, all while growing revenue 55% to UK£141m. That's progress.
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.
Fortunately, we've got access to analyst forecasts of Ashtead Technology Holdings' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Ashtead Technology Holdings Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Ashtead Technology Holdings insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at UK£10m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 2.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.