Do Ampol's (ASX:ALD) Earnings Warrant Your Attention?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Ampol (ASX:ALD), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Ampol

How Quickly Is Ampol Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Ampol's EPS has grown 26% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Ampol maintained stable EBIT margins over the last year, all while growing revenue 84% to AU$38b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Ampol's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Ampol 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.

We note that Ampol insiders spent AU$245k on stock, over the last year; in contrast, we didn't see any selling. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. It is also worth noting that it was Independent Non-Executive Chairman Steven Gregg who made the biggest single purchase, worth AU$110k, paying AU$27.50 per share.

Does Ampol Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Ampol'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. So on this analysis, Ampol is probably worth spending some time on. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Ampol , and understanding these should be part of your investment process.

Keen growth investors love to see insider buying. Thankfully, Ampol isn't the only one. You can see a a free list of them here.

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.