If EPS Growth Is Important To You, Transense Technologies (LON:TRT) Presents An Opportunity

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 Transense Technologies (LON:TRT). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Transense Technologies

Transense Technologies' Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. Which is why EPS growth is looked upon so favourably. It is awe-striking that Transense Technologies' EPS went from UK£0.0096 to UK£0.055 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. Could this be a sign that the business has reached an inflection point?

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. Transense Technologies shareholders can take confidence from the fact that EBIT margins are up from -9.8% to 8.1%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Transense Technologies isn't a huge company, given its market capitalisation of UK£14m. That makes it extra important to check on its balance sheet strength.

Are Transense Technologies 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.

Insiders both bought and sold Transense Technologies shares in the last year, but the good news is they spent UK£14k more buying than they netted selling. So, on balance, the insider transactions are mildly encouraging. We also note that it was the Executive Chairman, Nigel Rogers, who made the biggest single acquisition, paying UK£8.9k for shares at about UK£0.89 each.

Should You Add Transense Technologies To Your Watchlist?

Transense Technologies' earnings per share have been soaring, with growth rates sky high. Growth-minded people will be intrigued by the incredible movement in EPS growth. And may very well signal a significant inflection point for the business. If this is the case, then keeping a watch over Transense Technologies could be in your best interest. However, before you get too excited we've discovered 3 warning signs for Transense Technologies (1 shouldn't be ignored!) that you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Transense Technologies 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.