We Ran A Stock Scan For Earnings Growth And Smiths Group (LON:SMIN) Passed With Ease

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Smiths Group (LON:SMIN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Smiths Group

How Fast Is Smiths Group Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Smiths Group has achieved impressive annual EPS growth of 58%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. EBIT margins for Smiths Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 18% to UK£3.0b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Smiths Group's forecast profits?

Are Smiths Group 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Smiths Group insiders refrain from selling stock during the year, but they also spent UK£58k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading.

Does Smiths Group Deserve A Spot On Your Watchlist?

Smiths Group's 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 indeed, it could be a sign that the business is at an inflection point. If this these factors intrigue you, then an addition of Smiths Group to your watchlist won't go amiss. Before you take the next step you should know about the 1 warning sign for Smiths Group that we have uncovered.

Keen growth investors love to see insider buying. Thankfully, Smiths Group isn't the only one. You can see a a curated list of British companies which have exhibited consistent growth accompanied by recent insider buying.

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.