Is Now The Time To Put Austin Engineering (ASX:ANG) On Your Watchlist?

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. 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. 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 Austin Engineering (ASX:ANG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Austin Engineering with the means to add long-term value to shareholders.

See our latest analysis for Austin Engineering

How Fast Is Austin Engineering Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Impressively, Austin Engineering has grown EPS by 24% 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.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Austin Engineering maintained stable EBIT margins over the last year, all while growing revenue 21% to AU$288m. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Austin Engineering isn't a huge company, given its market capitalisation of AU$361m. That makes it extra important to check on its balance sheet strength.

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.

The good news for Austin Engineering shareholders is that no insiders reported selling 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. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Austin Engineering.

Is Austin Engineering Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Austin Engineering's strong EPS growth. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. In essence, your time will not be wasted checking out Austin Engineering in more detail. 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.

Keen growth investors love to see insider activity. Thankfully, Austin Engineering isn't the only one. You can see a a curated list of Australian companies which have exhibited consistent growth accompanied by high insider ownership.

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.