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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. 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. 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Topicus.com (CVE:TOI). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for Topicus.com
How Fast Is Topicus.com Growing Its Earnings Per Share?
Over the last three years, Topicus.com 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. So it would be better to isolate the growth rate over the last year for our analysis. Topicus.com's EPS skyrocketed from €0.70 to €0.94, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 34%.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Topicus.com achieved similar EBIT margins to last year, revenue grew by a solid 17% to €1.2b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Topicus.com's balance sheet strength, before getting too excited.
Are Topicus.com Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a CA$10b company like Topicus.com. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at €165m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
Should You Add Topicus.com To Your Watchlist?
You can't deny that Topicus.com has grown its earnings per share at a very impressive rate. That's attractive. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. You should always think about risks though. Case in point, we've spotted 1 warning sign for Topicus.com you should be aware of.