Do Accent Group's (ASX:AX1) Earnings Warrant Your Attention?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

So if you're like me, you might be more interested in profitable, growing companies, like Accent Group (ASX:AX1). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Accent Group

Accent Group's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Accent Group has managed to grow EPS by 30% per year over 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. This approach makes Accent Group look pretty good, on balance; although revenue is flattish, EBIT margins improved from 11% to 14% in the last year. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

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

Are Accent Group Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Accent Group shares worth a considerable sum. Indeed, they have a glittering mountain of wealth invested in it, currently valued at AU$350m. That equates to 27% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Is Accent Group Worth Keeping An Eye On?

For growth investors like me, Accent Group's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. It is worth noting though that we have found 1 warning sign for Accent Group that you need to take into consideration.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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. 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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