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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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Altitude Group (LON:ALT), which has not only revenues, but also profits. 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.
View our latest analysis for Altitude Group
How Fast Is Altitude Group Growing Its Earnings Per Share?
Over the last three years, Altitude Group 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. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Altitude Group's EPS shot from UK£0.0055 to UK£0.0096, over the last year. It's a rarity to see 75% year-on-year growth like that. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.
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. EBIT margins for Altitude Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 28% to UK£24m. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Since Altitude Group is no giant, with a market capitalisation of UK£22m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Altitude Group Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that Altitude Group insiders own a significant number of shares certainly is appealing. In fact, they own 42% of the shares, making insiders a very influential shareholder group. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Although, with Altitude Group being valued at UK£22m, this is a small company we're talking about. So despite a large proportional holding, insiders only have UK£9.4m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!