If EPS Growth Is Important To You, Shine Justice (ASX:SHJ) Presents An Opportunity

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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Shine Justice (ASX:SHJ), which has not only revenues, but also profits. 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.

See our latest analysis for Shine Justice

Shine Justice's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Shine Justice has grown EPS by 31% 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.

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 Shine Justice 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$215m. That's progress.

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.

Since Shine Justice is no giant, with a market capitalisation of AU$210m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Shine Justice 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.

Any way you look at it Shine Justice shareholders can gain quiet confidence from the fact that insiders shelled out AU$573k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. We also note that it was the Co-Founder, Simon Morrison, who made the biggest single acquisition, paying AU$371k for shares at about AU$1.35 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Shine Justice insiders own more than a third of the company. To be exact, company insiders hold 53% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. With that sort of holding, insiders have about AU$112m riding on the stock, at current prices. So there's plenty there to keep them focused!

Does Shine Justice Deserve A Spot On Your Watchlist?

For growth investors, Shine Justice's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. Before you take the next step you should know about the 1 warning sign for Shine Justice that we have uncovered.

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