If EPS Growth Is Important To You, United Oil & Gas (LON:UOG) Presents An Opportunity

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like United Oil & Gas (LON:UOG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide United Oil & Gas with the means to add long-term value to shareholders.

Check out our latest analysis for United Oil & Gas

United Oil & Gas' Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that United Oil & Gas' EPS went from US$0.0018 to US$0.0068 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. This could point to the business hitting a point of inflection.

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. Not all of United Oil & Gas' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. The good news is that United Oil & Gas is growing revenues, and EBIT margins improved by 20.7 percentage points to 56%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

United Oil & Gas isn't a huge company, given its market capitalisation of UK£11m. That makes it extra important to check on its balance sheet strength.

Are United Oil & Gas 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

A great takeaway for shareholders is that company insiders within United Oil & Gas have collectively spent US$25k acquiring shares in the company. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. It is also worth noting that it was Company Secretary Peter Dunne who made the biggest single purchase, worth UK£10.0k, paying UK£0.017 per share.

Does United Oil & Gas Deserve A Spot On Your Watchlist?

United Oil & Gas' earnings have taken off in quite an impressive fashion. Growth-minded people will be intrigued by the incredible movement in EPS growth. And may very well signal a significant inflection point for the business. If that's the case, you may regret neglecting to put United Oil & Gas on your watchlist. Even so, be aware that United Oil & Gas is showing 3 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

Keen growth investors love to see insider buying. Thankfully, United Oil & Gas 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.