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.’ Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Hamilton Beach Brands Holding (NYSE:HBB). 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.

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If you believe that markets are even vaguely efficient, then over the long term you’d expect a company’s share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Hamilton Beach Brands Holding has grown EPS by 13% per year. That growth rate is fairly good, assuming the company can keep it up.

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. EBIT margins for Hamilton Beach Brands Holding remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 4.6% to US$655m. That’s encouraging news for the company!

The chart below shows how the company’s bottom and top lines have progressed over time. For finer detail, click on the image.

See our latest analysis for Hamilton Beach Brands Holding

Hamilton Beach Brands Holding isn’t a huge company, given its market capitalisation of US$246m. That makes it extra important to check on its balance sheet strength.

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own Hamilton Beach Brands Holding shares worth a considerable sum. Given insiders own a significant chunk of shares, currently valued at US$65m, they have plenty of motivation to push the business to succeed. That holding amounts to 27% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.