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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.
In contrast to all that, many investors prefer to focus on companies like Weatherford International (NASDAQ:WFRD), which has not only revenues, but also profits. 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.
See our latest analysis for Weatherford International
Weatherford International's Improving Profits
Over the last three years, Weatherford International 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. So it would be better to isolate the growth rate over the last year for our analysis. Weatherford International boosted its trailing twelve month EPS from US$5.80 to US$6.95, in the last year. That's a 20% gain; respectable growth in the broader scheme of things.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Weatherford International achieved similar EBIT margins to last year, revenue grew by a solid 7.4% to US$5.5b. That's a real positive.
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.
Fortunately, we've got access to analyst forecasts of Weatherford International's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Weatherford International Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Weatherford International shares worth a considerable sum. Given insiders own a significant chunk of shares, currently valued at US$93m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.