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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
So if you’re like me, you might be more interested in profitable, growing companies, like GR Engineering Services ( ASX:GNG ).Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself.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.
View our latest analysis for GR Engineering Services
How Fast Is GR Engineering Services Growing? If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow.That makes EPS growth an attractive quality for any company.I, for one, am blown away by the fact that GR Engineering Services has grown EPS by 60% per year, over the last three years.Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.
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.
GR Engineering Services shareholders can take confidence from the fact that EBIT margins are up from 5.8% to 8.2%, and revenue is growing.Ticking those two boxes is a good sign of growth, in my book.
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.
earnings-and-revenue-history Since GR Engineering Services is no giant, with a market capitalization of AU$329m, so you should definitely check its cash and debt before getting too excited about its prospects.
Story continues Are GR Engineering Services Insiders Aligned With All Shareholders? Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders.So we’re pleased to report that GR Engineering Services insiders own a meaningful share of the business.In fact, they own 42% of the shares, making insiders a very influential shareholder group.I’m reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders.With that sort of holding, insiders have about AU$138m riding on the stock, at current prices.
That’s nothing to sneeze at!
Does GR Engineering Services Deserve A Spot On Your Watchlist? GR Engineering Services’s earnings have taken off like any random crypto-currency did, back in 2017.That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest.
At times fast EPS growth is a sign the business has reached an inflection point; and I do like those.So yes, on this short analysis I do think it’s worth considering GR Engineering Services for a spot on your watchlist.You still need to take note of risks, for example – GR Engineering Services has 2 warning signs we think you should be aware of.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares.But as a growth investor I always like to check out companies that do have those features.
You can access a free list of them here .
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..