With EPS Growth And More, Torex Gold Resources (TSE:TXG) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Torex Gold Resources (TSE:TXG), 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 Torex Gold Resources

Torex Gold Resources' Improving Profits

Over the last three years, Torex Gold Resources has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Torex Gold Resources' EPS skyrocketed from US$1.71 to US$2.58, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 52%.

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 have declined for Torex Gold Resources, but revenue stability should provide some reassurance to shareholders. Shareholders will be hopeful that the company can buck this trend.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Torex Gold Resources' future EPS 100% free.

Are Torex Gold 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We haven't seen any insiders selling Torex Gold Resources shares, in the last year. Add in the fact that Jay Kellerman, the Independent Director of the company, paid US$45k for shares at around US$15.38 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

Does Torex Gold Resources Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Torex Gold Resources' strong EPS growth. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. In essence, your time will not be wasted checking out Torex Gold Resources in more detail. It is worth noting though that we have found 2 warning signs for Torex Gold Resources that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, Torex Gold Resources isn't the only one. You can see a 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.