If You Like EPS Growth Then Check Out Bell Financial Group (ASX:BFG) Before It's Too Late

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Bell Financial Group (ASX:BFG). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Bell Financial Group

Bell Financial Group's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Bell Financial Group has grown EPS by 18% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. Not all of Bell Financial Group's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Bell Financial Group's EBIT margins were flat over the last year, revenue grew by a solid 8.2% to AU$255m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Bell Financial Group's balance sheet strength, before getting too excited.

Are Bell Financial Group Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

First things first; I didn't see insiders sell Bell Financial Group shares in the last year. But the really good news is that Executive Chairman & MD Alastair Provan spent AU$368k buying stock stock, at an average price of around AU$1.23. Big buys like that give me a sense of opportunity; actions speak louder than words.

On top of the insider buying, it's good to see that Bell Financial Group insiders have a valuable investment in the business. To be specific, they have AU$48m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 10% of the company, demonstrating a degree of high-level alignment with shareholders.

Is Bell Financial Group Worth Keeping An Eye On?

You can't deny that Bell Financial 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 I think this stock may well deserve a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Bell Financial Group , and understanding these should be part of your investment process.

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