With EPS Growth And More, Balfour Beatty (LON:BBY) 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 Balfour Beatty (LON:BBY), which has not only revenues, but also profits. 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.

See our latest analysis for Balfour Beatty

How Quickly Is Balfour Beatty Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Balfour Beatty has achieved impressive annual EPS growth of 39%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. Balfour Beatty shareholders can take confidence from the fact that EBIT margins are up from 0.1% to 2.2%, and revenue is growing. Both of which are great metrics to check off for potential 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.

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

Are Balfour Beatty Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own Balfour Beatty shares worth a considerable sum. Indeed, they hold UK£15m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.7% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Balfour Beatty To Your Watchlist?

Balfour Beatty's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Balfour Beatty is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that Balfour Beatty is showing 4 warning signs in our investment analysis , and 1 of those is potentially serious...

Although Balfour Beatty certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.