Should You Be Adding Aurizon Holdings (ASX:AZJ) To Your Watchlist Today?

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.' 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 Aurizon Holdings (ASX:AZJ), 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.

View our latest analysis for Aurizon Holdings

How Quickly Is Aurizon Holdings Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Over the last three years, Aurizon Holdings has grown EPS by 8.5% per year. That growth rate is fairly good, assuming the company can keep it up.

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. Aurizon Holdings reported flat revenue and EBIT margins over the last year. While this doesn't ring alarm bells, it may not meet the expectations of growth-minded investors.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

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 Aurizon Holdings' future EPS 100% free.

Are Aurizon Holdings 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.

The good news is that Aurizon Holdings insiders spent a whopping AU$3.7m on stock in just one year, without so much as a single sale. Knowing this, Aurizon Holdings will have have all eyes on them in anticipation for the what could happen in the near future. It is also worth noting that it was MD, CEO & Director Andrew Harding who made the biggest single purchase, worth AU$3.4m, paying AU$3.43 per share.

Is Aurizon Holdings Worth Keeping An Eye On?

One important encouraging feature of Aurizon Holdings is that it is growing profits. While some companies are struggling to grow EPS, Aurizon Holdings seems free from that morose affliction. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. It is worth noting though that we have found 2 warning signs for Aurizon Holdings that you need to take into consideration.

The good news is that Aurizon Holdings is not the only growth stock with insider buying. Here's a list of them... 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. 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.