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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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like Dynacor Group (TSE:DNG), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for Dynacor Group
Dynacor Group's Earnings Per Share Are Growing
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Dynacor Group has grown EPS by 30% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Dynacor Group achieved similar EBIT margins to last year, revenue grew by a solid 19% to US$277m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Since Dynacor Group is no giant, with a market capitalisation of CA$215m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Dynacor Group Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Insiders in Dynacor Group both added to and reduced their holdings over the preceding 12 months. All in all though, their acquisitions outweighed the amount of shares they sold off. So, on balance, the insider transactions are mildly encouraging. It is also worth noting that it was Independent Chairman of the Board Pierre Lepine who made the biggest single purchase, worth CA$75k, paying CA$5.22 per share.