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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Mears Group (LON:MER). 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 Mears Group

How Quickly Is Mears Group Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Impressively, Mears Group has grown EPS by 18% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Mears Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 9.2% to UK£960m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image. earnings-and-revenue-history

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Mears Group's future EPS 100% free.



Are Mears Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

With strong conviction, Mears Group insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the CFO & Executive Director, Andrew C. Smith, paid UK£48k to buy shares at an average price of UK£1.91. Purchases like this clue us in to the to the faith management has in the business' future.

Should You Add Mears Group To Your Watchlist?

For growth investors, Mears Group's raw rate of earnings growth is a beacon in the night. Growth in EPS isn't the only striking feature with company insiders adding to their holdings being another noteworthy vote of confidence for the company. So on this analysis, Mears Group is probably worth spending some time on. However, before you get too excited we've discovered 2 warning signs for Mears Group (1 makes us a bit uncomfortable!) that you should be aware of.

The good news is that Mears Group is not the only growth stock with insider buying. Here's  a list of them... with insider buying in the last three months!

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.

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