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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. 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 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 Vita Life Sciences (ASX:VLS). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Vita Life Sciences
Vita Life Sciences' Earnings Per Share Are 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Vita Life Sciences grew its EPS by 9.6% per year. That growth rate is fairly good, assuming the company can keep it up.
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 Vita Life Sciences achieved similar EBIT margins to last year, revenue grew by a solid 15% to AU$79m. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Since Vita Life Sciences is no giant, with a market capitalisation of AU$110m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Vita Life Sciences Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own Vita Life Sciences shares worth a considerable sum. Indeed, they hold AU$33m worth of its stock. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 30% of the shares on issue for the business, an appreciable amount considering the market cap.