Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, ‘If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.’ When they buy such story stocks, investors are all too often the patsy.
In contrast to all that, I prefer to spend time on companies like Oracle Financial Services Software (NSE:OFSS), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
See our latest analysis for Oracle Financial Services Software
How Quickly Is Oracle Financial Services Software Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. We can see that in the last three years Oracle Financial Services Software grew its EPS by 6.3% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Oracle Financial Services Software shareholders can take confidence from the fact that EBIT margins are up from 39% to 43%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
While we live in the present moment at all times, there’s no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Oracle Financial Services Software?
Are Oracle Financial Services Software Insiders Aligned With All Shareholders?
As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. I discovered that the median total compensation for the CEOs of companies like Oracle Financial Services Software with market caps between ₹144b and ₹460b is about ₹51m.
The Oracle Financial Services Software CEO received ₹33.2m in compensation for the year ending March 2019. That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Oracle Financial Services Software To Your Watchlist?
One important encouraging feature of Oracle Financial Services Software is that it is growing profits. On top of that, my faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So all in all I think it’s worth at least considering for your watchlist. While we’ve looked at the quality of the earnings, we haven’t yet done any work to value the stock. So if you like to buy cheap, you may want to check if Oracle Financial Services Software is trading on a high P/E or a low P/E, relative to its industry.
Although Oracle Financial Services Software certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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