The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

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 North European Oil Royalty Trust (NYSE:NRT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide North European Oil Royalty Trust with the means to add long-term value to shareholders.

See our latest analysis for North European Oil Royalty Trust

North European Oil Royalty Trust's Improving Profits

In the last three years North European Oil Royalty Trust'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. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, North European Oil Royalty Trust's EPS grew from US$1.25 to US$3.07, over the previous 12 months. It's not often a company can achieve year-on-year growth of 145%. That could be a sign that the business has reached a true inflection point.

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. North European Oil Royalty Trust shareholders can take confidence from the fact that EBIT margins are up from 94% to 97%, and revenue is growing. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Since North European Oil Royalty Trust is no giant, with a market capitalisation of US$54m, you should definitely check its cash and debt before getting too excited about its prospects.

Are North European Oil Royalty Trust Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. The median total compensation for CEOs of companies similar in size to North European Oil Royalty Trust, with market caps under US$200m is around US$724k.