We Ran A Stock Scan For Earnings Growth And Genesis Minerals (ASX:GMD) Passed With Ease
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Genesis Minerals (ASX:GMD). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Genesis Minerals' Improving Profits
Genesis Minerals has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, Genesis Minerals' EPS catapulted from AU$0.091 to AU$0.19, over the last year. It's not often a company can achieve year-on-year growth of 113%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.
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. Genesis Minerals shareholders can take confidence from the fact that EBIT margins are up from 12% to 34%, and revenue is growing. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Check out our latest analysis for Genesis Minerals
Fortunately, we've got access to analyst forecasts of Genesis Minerals' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Genesis Minerals Insiders Aligned With All Shareholders?
Owing to the size of Genesis Minerals, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth AU$365m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
Is Genesis Minerals Worth Keeping An Eye On?
Genesis Minerals' earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Genesis Minerals very closely. You still need to take note of risks, for example - Genesis Minerals has 1 warning sign we think 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 tailored list of Australian companies which have demonstrated growth backed by significant insider holdings.
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.