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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like MoneyMax Financial Services (Catalist:5WJ). 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 MoneyMax Financial Services
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, MoneyMax Financial Services has grown EPS by 8.6% per year. That's a good rate of growth, if it can be sustained.
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 MoneyMax Financial Services achieved similar EBIT margins to last year, revenue grew by a solid 38% to S$341m. That's a real positive.
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.
Since MoneyMax Financial Services is no giant, with a market capitalisation of S$164m, you should definitely check its cash and debt before getting too excited about its prospects.
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. MoneyMax Financial Services followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. As a matter of fact, their holding is valued at S$49m. This considerable investment should help drive long-term value in the business. Those holdings account for over 30% of the company; visible skin in the game.