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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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
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 Green Cross Health (NZSE:GXH). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
How Fast Is Green Cross Health Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Green Cross Health has grown EPS by 15% per year. That's a good rate of growth, if it can be sustained.
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. Green Cross Health maintained stable EBIT margins over the last year, all while growing revenue 18% to NZ$670m. That's encouraging news for the company!
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Green Cross Health isn't a huge company, given its market capitalisation of NZ$183m. That makes it extra important to check on its balance sheet strength.
Are Green Cross Health 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 Green Cross Health insiders own a significant number of shares certainly is appealing. Actually, with 37% of the company to their names, insiders are profoundly invested in the business. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. To give you an idea, the value of insiders' holdings in the business are valued at NZ$69m at the current share price. That should be more than enough to keep them focussed on creating shareholder value!
Does Green Cross Health Deserve A Spot On Your Watchlist?
One positive for Green Cross Health is that it is growing EPS. That's nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Green Cross Health that you should be aware of.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.
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.