If EPS Growth Is Important To You, Linamar (TSE:LNR) Presents An Opportunity

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Linamar (TSE:LNR). 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 Linamar

Linamar'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 you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Over the last three years, Linamar has grown EPS by 7.9% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. EBIT margins for Linamar remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 29% to CA$8.4b. That's progress.

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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Linamar's future profits.

Are Linamar Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Linamar insiders have a significant amount of capital invested in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at CA$1.3b. Coming in at 34% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

Does Linamar Deserve A Spot On Your Watchlist?

One important encouraging feature of Linamar is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. The combination definitely favoured by investors so consider keeping the company on a watchlist. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Linamar (1 is a bit unpleasant) you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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.