Should You Be Adding Balfour Beatty (LON:BBY) To Your Watchlist Today?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Balfour Beatty (LON:BBY). 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 Balfour Beatty

Balfour Beatty's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Balfour Beatty's EPS has grown 25% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While Balfour Beatty may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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 Balfour Beatty's future EPS 100% free.

Are Balfour Beatty 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Any way you look at it Balfour Beatty shareholders can gain quiet confidence from the fact that insiders shelled out UK£189k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. We also note that it was the Group Chief Executive & Executive Director, Leo Quinn, who made the biggest single acquisition, paying UK£189k for shares at about UK£2.40 each.

Along with the insider buying, another encouraging sign for Balfour Beatty is that insiders, as a group, have a considerable shareholding. To be specific, they have UK£13m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.6% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Balfour Beatty Deserve A Spot On Your Watchlist?

For growth investors, Balfour Beatty's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. These things considered, this is one stock worth watching. However, before you get too excited we've discovered 3 warning signs for Balfour Beatty (1 doesn't sit too well with us!) that you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Balfour Beatty 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.