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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 SKY Network Television (NZSE:SKT). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
SKY Network Television's Improving Profits
Over the last three years, SKY Network Television 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. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, SKY Network Television's EPS shot from NZ$0.25 to NZ$0.43, over the last year. It's not often a company can achieve year-on-year growth of 70%.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note SKY Network Television achieved similar EBIT margins to last year, revenue grew by a solid 3.5% to NZ$736m. That's progress.
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 SKY Network Television's forecast profits?
Are SKY Network Television Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Shareholders in SKY Network Television will be more than happy to see insiders committing themselves to the company, spending NZ$433k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. We also note that it was the Independent Chairman, Philip Bowman, who made the biggest single acquisition, paying NZ$278k for shares at about NZ$2.22 each.
Does SKY Network Television Deserve A Spot On Your Watchlist?
SKY Network Television's earnings have taken off in quite an impressive fashion. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If that's the case, you may regret neglecting to put SKY Network Television on your watchlist. Before you take the next step you should know about the 2 warning signs for SKY Network Television (1 is significant!) that we have uncovered.
The good news is that SKY Network Television is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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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