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.’ 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 Deutsche Bank (ETR:DBK). 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.
Check out our latest analysis for Deutsche Bank
Deutsche Bank’s Improving Profits
In the last three years Deutsche Bank’s earnings per share took off; so much so that it’s a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Deutsche Bank’s EPS grew from €1.04 to €2.53, over the previous 12 months. It’s not often a company can achieve year-on-year growth of 143%.
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. It’s noted that Deutsche Bank’s revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Deutsche Bank maintained stable EBIT margins over the last year, all while growing revenue 6.0% to €26b. That’s a real positive.
The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Fortunately, we’ve got access to analyst forecasts of Deutsche Bank’s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Deutsche Bank Insiders Aligned With All Shareholders?
Since Deutsche Bank has a market capitalisation of €20b, we wouldn’t expect insiders to hold a large percentage of shares. But thanks to their investment in the company, it’s pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they have a considerable amount of wealth invested in it, currently valued at €1.9b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company’s future.
Is Deutsche Bank Worth Keeping An Eye On?
Deutsche Bank’s earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it’s worth considering Deutsche Bank for a spot on your watchlist. What about risks? Every company has them, and we’ve spotted 1 warning sign for Deutsche Bank you should know about.
Although Deutsche Bank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
