Do Austin Engineering's (ASX:ANG) Earnings Warrant Your Attention?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Austin Engineering (ASX:ANG). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Austin Engineering

How Fast Is Austin Engineering Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Austin Engineering's EPS has grown 24% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Austin Engineering remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 21% to AU$288m. That's progress.

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.

Since Austin Engineering is no giant, with a market capitalisation of AU$273m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Austin Engineering 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We haven't seen any insiders selling Austin Engineering shares, in the last year. With that in mind, it's heartening that David Patrick Singleton, the CEO, MD & Director of the company, paid AU$50k for shares at around AU$0.27 each. It seems that at least one insider is prepared to show the market there is potential within Austin Engineering.

Does Austin Engineering Deserve A Spot On Your Watchlist?

For growth investors, Austin Engineering's raw rate of earnings growth is a beacon in the night. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. So on this analysis, Austin Engineering is probably worth spending some time on. Of course, just because Austin Engineering is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Austin Engineering, you'll probably love this curated collection of companies in AU that have witnessed growth alongside 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.