With EPS Growth And More, Aqua (WSE:AQA) 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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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

Check out our latest analysis for Aqua

Aqua's Improving Profits

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that Aqua grew its EPS from zł0.17 to zł1.09, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?

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. The music to the ears of Aqua shareholders is that EBIT margins have grown from 15% to 20% in the last 12 months and revenues are on an upwards trend as well. 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. To see the actual numbers, click on the chart.

Aqua isn't a huge company, given its market capitalisation of zł8.1m. That makes it extra important to check on its balance sheet strength.

Are Aqua Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Aqua insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 84% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Although, with Aqua being valued at zł8.1m, this is a small company we're talking about. So despite a large proportional holding, insiders only have zł6.8m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Is Aqua Worth Keeping An Eye On?

Aqua'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. Based on the sum of its parts, we definitely think its worth watching Aqua very closely. Before you take the next step you should know about the 4 warning signs for Aqua (1 is potentially serious!) that we have uncovered.

Although Aqua 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.