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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. 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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like RHI Magnesita (LON:RHIM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide RHI Magnesita with the means to add long-term value to shareholders.
Check out our latest analysis for RHI Magnesita
RHI Magnesita's Improving Profits
Over the last three years, RHI Magnesita 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. As a result, we'll zoom in on growth over the last year, instead. In previous twelve months, RHI Magnesita's EPS has risen from €3.31 to €3.49. That's a modest gain of 5.4%.
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 RHI Magnesita achieved similar EBIT margins to last year, revenue grew by a solid 7.7% to €3.6b. That's encouraging news for the company!
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for RHI Magnesita?
Are RHI Magnesita Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own RHI Magnesita shares worth a considerable sum. Indeed, they have a considerable amount of wealth invested in it, currently valued at €130m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.