If EPS Growth Is Important To You, Torex Gold Resources (TSE:TXG) Presents An Opportunity

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 currently 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Torex Gold Resources (TSE:TXG). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Torex Gold Resources

Torex Gold Resources' Improving Profits

In the last three years Torex Gold Resources' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Torex Gold Resources' EPS skyrocketed from US$1.59 to US$2.53, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 58%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for Torex Gold Resources remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.9% to US$890m. That's a real positive.

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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Torex Gold Resources?

Are Torex Gold Resources 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Torex Gold Resources insiders refrain from selling stock during the year, but they also spent US$78k buying it. That's nice to see, because it suggests insiders are optimistic.

Should You Add Torex Gold Resources To Your Watchlist?

You can't deny that Torex Gold Resources has grown its earnings per share at a very impressive rate. That's attractive. 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, Torex Gold Resources is probably worth spending some time on. We don't want to rain on the parade too much, but we did also find 1 warning sign for Torex Gold Resources that you need to be mindful of.

The good news is that Torex Gold Resources 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.