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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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Trip.com Group (NASDAQ:TCOM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Trip.com Group with the means to add long-term value to shareholders.
Trip.com Group's Improving Profits
Trip.com Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Impressively, Trip.com Group's EPS catapulted from CN¥15.19 to CN¥26.11, over the last year. It's a rarity to see 72% year-on-year growth like that.
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. It's noted that Trip.com Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Trip.com Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 20% to CN¥53b. 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.
See our latest analysis for Trip.com Group
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Trip.com Group.
Are Trip.com Group Insiders Aligned With All Shareholders?
Owing to the size of Trip.com Group, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth CN¥808m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.