Here's Why We Think Woolworths Group (ASX:WOW) Might Deserve Your Attention Today

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

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

See our latest analysis for Woolworths Group

How Fast Is Woolworths Group Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Woolworths Group has grown EPS by 23% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Woolworths Group maintained stable EBIT margins over the last year, all while growing revenue 5.7% to AU$64b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Woolworths Group's future EPS 100% free.

Are Woolworths Group 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. 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.

Woolworths Group top brass are certainly in sync, not having sold any shares, over the last year. But more importantly, Independent Non-Executive Director Tracey Fellows spent AU$95k acquiring shares, doing so at an average price of AU$37.76. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Along with the insider buying, another encouraging sign for Woolworths Group is that insiders, as a group, have a considerable shareholding. To be specific, they have AU$22m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.05%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Does Woolworths Group Deserve A Spot On Your Watchlist?

You can't deny that Woolworths Group has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Woolworths Group is trading on a high P/E or a low P/E, relative to its industry.

The good news is that Woolworths Group is not the only growth stock with insider buying. Here's a list of them... 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.