Is Now The Time To Put Strathcona Resources (TSE:SCR) On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Strathcona Resources (TSE:SCR), 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 Strathcona Resources

How Quickly Is Strathcona Resources Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Strathcona Resources' EPS has grown 25% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Strathcona Resources is growing revenues, and EBIT margins improved by 6.6 percentage points to 27%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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

Are Strathcona Resources Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The real kicker here is that Strathcona Resources insiders spent a staggering CA$1.5m on acquiring shares in just one year, without single share being sold in the meantime. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. Zooming in, we can see that the biggest insider purchase was by Senior Vice President of Finance Scott Seipert for CA$286k worth of shares, at about CA$28.58 per share.

Is Strathcona Resources Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Strathcona Resources' strong EPS growth. Growth in EPS isn't the only striking feature with company insiders adding to their holdings being another noteworthy vote of confidence for the company. So on this analysis, Strathcona Resources is probably worth spending some time on. It is worth noting though that we have found 2 warning signs for Strathcona Resources (1 shouldn't be ignored!) 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 Strathcona Resources, you'll probably love this curated collection of companies in CA that have an attractive valuation alongside 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.