If EPS Growth Is Important To You, GUD Holdings (ASX:GUD) Presents An Opportunity

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

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 GUD Holdings (ASX:GUD). 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.

View our latest analysis for GUD Holdings

How Quickly Is GUD Holdings Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years GUD Holdings grew its EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.

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 GUD Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 25% to AU$1.0b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of GUD Holdings' forecast profits?

Are GUD Holdings 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did GUD Holdings insiders refrain from selling stock during the year, but they also spent AU$198k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. It is also worth noting that it was CEO, MD & Director Graeme Whickman who made the biggest single purchase, worth AU$76k, paying AU$7.60 per share.

Does GUD Holdings Deserve A Spot On Your Watchlist?

One positive for GUD Holdings is that it is growing EPS. That's nice to see. It's not easy for business to grow EPS, but GUD Holdings has shown the strengths to do just that. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. We don't want to rain on the parade too much, but we did also find 2 warning signs for GUD Holdings that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of GUD Holdings, you'll probably love this free list of growing companies that insiders are buying.

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.