Do IMI's (LON:IMI) Earnings Warrant Your Attention?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like IMI (LON:IMI). 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 IMI

IMI'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. We can see that in the last three years IMI grew its EPS by 8.4% per year. That growth rate is fairly good, assuming the company can keep it up.

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 for IMI remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 3.5% to UK£1.9b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

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 IMI's future EPS 100% free.

Are IMI Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.

The good news for IMI shareholders is that no insiders reported selling shares in the last year. Add in the fact that Caroline Dowling, the Independent Non-Executive Director of the company, paid UK£19k for shares at around UK£14.33 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in IMI.

Does IMI Deserve A Spot On Your Watchlist?

One positive for IMI is that it is growing EPS. That's nice to see. It's not easy for business to grow EPS, but IMI has shown the strengths to do just that. The cherry on top is that we have an insider buying shares. A further encouragement to keep an eye on this stock. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with IMI , and understanding it should be part of your investment process.

Keen growth investors love to see insider buying. Thankfully, IMI 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.