With EPS Growth And More, Aurizon Holdings (ASX:AZJ) Is Interesting

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Aurizon Holdings (ASX:AZJ). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Aurizon Holdings

How Fast Is Aurizon Holdings Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Aurizon Holdings managed to grow EPS by 8.5% per year, over three years. That's a good rate of growth, if it can be sustained.

I like to take a look at earnings before interest and (EBIT) tax 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. That's not bad, but it doesn't point to ongoing future growth, either.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Aurizon Holdings's forecast profits?

Are Aurizon Holdings 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The good news is that Aurizon Holdings insiders spent a whopping AU$3.9m on stock in just one year, and I didn't see any selling. And so I find myself almost expectant, and certainly hopeful, that this large outlay signals prescient optimism for the business. Zooming in, we can see that the biggest insider purchase was by MD, CEO & Director Andrew Harding for AU$3.4m worth of shares, at about AU$3.43 per share.

Does Aurizon Holdings Deserve A Spot On Your Watchlist?

As I already mentioned, Aurizon Holdings is a growing business, which is what I like to see. While some companies are struggling to grow EPS, Aurizon Holdings seems free from that morose affliction. The gravy on the mushroom pie is the insider buying, which has me tasting potential opportunity; one for the watchlist, I'd posit. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Aurizon Holdings , and understanding these should be part of your investment process.

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.