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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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
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 Spin Master (TSE:TOY). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Spin Master with the means to add long-term value to shareholders.
View our latest analysis for Spin Master
How Quickly Is Spin Master Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Spin Master’s EPS has grown 24% each year, compound, over three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be beaming.
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. Spin Master shareholders can take confidence from the fact that EBIT margins are up from 8.3% to 16%, and revenue is growing. That’s great to see, on both counts.
The chart below shows how the company’s bottom and top lines have progressed over time. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Spin Master’s forecast profits?
Are Spin Master 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 Spin Master insiders own a significant number of shares certainly is appealing. In fact, they own 40% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. US$2.0b This is an incredible endorsement from them.
Should You Add Spin Master To Your Watchlist?
You can’t deny that Spin Master has grown its earnings per share at a very impressive rate. That’s attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Spin Master’s continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it’s a good stock to follow. Now, you could try to make up your mind on Spin Master by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
Although Spin Master certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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