If EPS Growth Is Important To You, Greencore Group (LON:GNC) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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 Greencore Group (LON:GNC). 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.

View our latest analysis for Greencore Group

Greencore Group's Improving Profits

Greencore Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Greencore Group's EPS grew from UK£0.052 to UK£0.12, over the previous 12 months. It's not often a company can achieve year-on-year growth of 128%.

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. Despite consistency in EBIT margins year on year, Greencore Group has actually recorded a dip in revenue. While this may raise concerns, investors should investigate the reasoning behind this.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

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

Are Greencore Group Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

With strong conviction, Greencore Group insiders have stood united by refusing to sell shares over the last year. But the real excitement comes from the UK£52k that Independent Non-Executive Director Anne O’Leary spent buying shares (at an average price of about UK£1.05). Purchases like this clue us in to the to the faith management has in the business' future.

Does Greencore Group Deserve A Spot On Your Watchlist?

Greencore Group's earnings per share have been soaring, with growth rates sky high. Growth investors should find it difficult to look past that strong EPS move. And in fact, it could well signal a fundamental shift in the business economics. If this is the case, then keeping a watch over Greencore Group could be in your best interest. We should say that we've discovered 1 warning sign for Greencore Group that you should be aware of before investing here.

The good news is that Greencore Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in GB with insider buying in the last three months!

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.