Do Guardian Capital Group's (TSE:GCG.A) Earnings Warrant Your Attention?

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 completely lacks a track record of revenue and 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Guardian Capital Group (TSE:GCG.A). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Guardian Capital Group

Guardian Capital Group's Improving Profits

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. It is therefore awe-striking that Guardian Capital Group's EPS went from CA$1.67 to CA$7.46 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. Not all of Guardian Capital Group's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Guardian Capital Group shareholders can take confidence from the fact that EBIT margins are up from 26% to 29%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Guardian Capital 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 Guardian Capital Group Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.

Like a sturdy phalanx Guardian Capital Group insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the Independent Director, Petros Christodoulou, paid CA$166k to buy shares at an average price of CA$32.94.

The good news, alongside the insider buying, for Guardian Capital Group bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have CA$34m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 4.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Guardian Capital Group To Your Watchlist?

Guardian Capital Group's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Guardian Capital Group belongs on the top of your watchlist. It is worth noting though that we have found 2 warning signs for Guardian Capital Group that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Guardian Capital Group, you'll probably love this free list of growing companies that insiders are buying.

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.