With EPS Growth And More, ATS Automation Tooling Systems (TSE:ATA) Makes An Interesting Case

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 ATS Automation Tooling Systems (TSE:ATA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide ATS Automation Tooling Systems with the means to add long-term value to shareholders.

View our latest analysis for ATS Automation Tooling Systems

How Fast Is ATS Automation Tooling Systems Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that ATS Automation Tooling Systems' EPS has grown 21% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. EBIT margins for ATS Automation Tooling Systems remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 53% to CA$2.2b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

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

Are ATS Automation Tooling Systems 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

In the last twelve months ATS Automation Tooling Systems insiders spent CA$55k on stock; good news for shareholders. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling.

Along with the insider buying, another encouraging sign for ATS Automation Tooling Systems is that insiders, as a group, have a considerable shareholding. Indeed, they hold CA$23m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.6%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is ATS Automation Tooling Systems Worth Keeping An Eye On?

You can't deny that ATS Automation Tooling Systems has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. Astute investors will want to keep this stock on watch. What about risks? Every company has them, and we've spotted 1 warning sign for ATS Automation Tooling Systems you should know about.

The good news is that ATS Automation Tooling Systems 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.