I Ran A Stock Scan For Earnings Growth And Standard Chartered (LON:STAN) Passed With Ease

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Standard Chartered (LON:STAN). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Standard Chartered

How Fast Is Standard Chartered Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Standard Chartered grew its EPS by 14% per year. That's a pretty good rate, if the company can sustain it.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of Standard Chartered'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. While we note Standard Chartered's EBIT margins were flat over the last year, revenue grew by a solid 9.0% to US$14b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of Standard Chartered's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Standard Chartered 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We do note that, in the last year, insiders sold -US$480k worth of shares. But that's far less than the US$2.4m insiders spend purchasing stock. This makes me even more interested in Standard Chartered because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Group Chief Executive & Director William Winters who made the biggest single purchase, worth UK£833k, paying UK£4.90 per share.

Along with the insider buying, another encouraging sign for Standard Chartered is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$32m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Standard Chartered Deserve A Spot On Your Watchlist?

As I already mentioned, Standard Chartered is a growing business, which is what I like to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. We should say that we've discovered 1 warning sign for Standard Chartered that you should be aware of before investing here.

As a growth investor I do like to see insider buying. But Standard Chartered 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.