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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 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Siebert Financial (NASDAQ:SIEB). 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.
Check out our latest analysis for Siebert Financial
Siebert Financial's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Siebert Financial managed to grow EPS by 15% per year, over three years. That's a pretty good rate, if the company can sustain it.
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. It's noted that Siebert Financial's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Siebert Financial achieved similar EBIT margins to last year, revenue grew by a solid 28% to US$83m. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Since Siebert Financial is no giant, with a market capitalisation of US$100m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Siebert Financial Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Siebert Financial insiders own a significant number of shares certainly is appealing. Owning 46% of the company, insiders have plenty riding on the performance of the the share price. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. To give you an idea, the value of insiders' holdings in the business are valued at US$46m at the current share price. That should be more than enough to keep them focussed on creating shareholder value!