National Australia Bank (ASX:NAB) Ticks All The Boxes When It Comes To Earnings Growth

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like National Australia Bank (ASX:NAB). 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 National Australia Bank

National Australia Bank's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years National Australia Bank grew its EPS by 15% per year. That's a good rate of growth, if it can be sustained.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of National Australia Bank's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for National Australia Bank remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 11% to AU$20b. 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. 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 National Australia Bank's forecast profits?

Are National Australia Bank Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

With strong conviction, National Australia Bank insiders have stood united by refusing to sell shares over the last year. But more importantly, Independent Non-Executive Director Christine Fellowes spent AU$100k acquiring shares, doing so at an average price of AU$29.04. Purchases like this clue us in to the to the faith management has in the business' future.

Along with the insider buying, another encouraging sign for National Australia Bank is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at AU$31m. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.03% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add National Australia Bank To Your Watchlist?

As previously touched on, National Australia Bank is a growing business, which is encouraging. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. It is worth noting though that we have found 1 warning sign for National Australia Bank that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of National Australia Bank, 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.