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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Art's-Way Manufacturing (NASDAQ:ARTW). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Art's-Way Manufacturing

Art's-Way Manufacturing's Improving Profits

In the last three years Art's-Way Manufacturing'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. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, Art's-Way Manufacturing's EPS soared from US$0.13 to US$0.17, over the last year. That's a impressive gain of 27%.

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 Art's-Way Manufacturing remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 25% to US$33m. That's encouraging news for the company!

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.

Art's-Way Manufacturing isn't a huge company, given its market capitalisation of US$10m. That makes it extra important to check on its balance sheet strength.

Are Art's-Way Manufacturing 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 Art's-Way Manufacturing, with market caps under US$200m is around US$741k.

The Art's-Way Manufacturing CEO received US$425k in compensation for the year ending November 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.