If EPS Growth Is Important To You, G8 Education (ASX:GEM) Presents An Opportunity

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like G8 Education (ASX:GEM). 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.

Check out our latest analysis for G8 Education

How Fast Is G8 Education Growing Its Earnings Per Share?

In the last three years G8 Education's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, G8 Education's EPS soared from AU$0.036 to AU$0.053, over the last year. That's a impressive gain of 46%.

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. The music to the ears of G8 Education shareholders is that EBIT margins have grown from 9.8% to 12% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

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

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 G8 Education's future EPS 100% free.

Are G8 Education 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Not only did G8 Education insiders refrain from selling stock during the year, but they also spent AU$247k buying it. This is a good look for the company as it paints an optimistic picture for the future. It is also worth noting that it was CEO, MD & Director Pejman Okhovat who made the biggest single purchase, worth AU$108k, paying AU$1.08 per share.

Is G8 Education Worth Keeping An Eye On?

For growth investors, G8 Education's raw rate of earnings growth is a beacon in the night. Growth in EPS isn't the only striking feature with company insiders adding to their holdings being another noteworthy vote of confidence for the company. So on this analysis, G8 Education is probably worth spending some time on. It is worth noting though that we have found 1 warning sign for G8 Education 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 G8 Education, 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.