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The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 TransDigm Group (NYSE:TDG). 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.
Check out our latest analysis for TransDigm Group
How Fast Is TransDigm Group Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that TransDigm Group's EPS has grown 33% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. While we note TransDigm Group achieved similar EBIT margins to last year, revenue grew by a solid 17% to US$8.2b. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of TransDigm Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are TransDigm Group Insiders Aligned With All Shareholders?
Owing to the size of TransDigm Group, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$281m. While that is a lot of skin in the game, we note this holding only totals to 0.4% of the business, which is a result of the company being so large. This still shows shareholders there is a degree of alignment between management and themselves.