Is Now The Time To Put Advanced Braking Technology (ASX:ABV) On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Advanced Braking Technology (ASX:ABV). 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.

See our latest analysis for Advanced Braking Technology

Advanced Braking Technology's Earnings Per Share Are Growing

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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that Advanced Braking Technology has grown EPS by 54% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. While we note Advanced Braking Technology achieved similar EBIT margins to last year, revenue grew by a solid 12% to AU$14m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Advanced Braking Technology isn't a huge company, given its market capitalisation of AU$18m. That makes it extra important to check on its balance sheet strength.

Are Advanced Braking Technology Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Over the last 12 months Advanced Braking Technology insiders spent AU$97k more buying shares than they received from selling them. On balance, that's a good sign. Zooming in, we can see that the biggest insider purchase was by company insider Keith Knowles for AU$320k worth of shares, at about AU$0.044 per share.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Advanced Braking Technology will reveal that insiders own a significant piece of the pie. To be exact, company insiders hold 51% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Valued at only AU$18m Advanced Braking Technology is really small for a listed company. That means insiders only have AU$9.1m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Advanced Braking Technology To Your Watchlist?

Advanced Braking Technology's earnings per share growth have been climbing higher at an appreciable rate. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Advanced Braking Technology deserves timely attention. You should always think about risks though. Case in point, we've spotted 2 warning signs for Advanced Braking Technology you should be aware of, and 1 of them is potentially serious.

The good news is that Advanced Braking Technology is not the only growth stock with insider buying. Here's a list of growth-focused companies in AU 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.

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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.