With EPS Growth And More, Rush Enterprises (NASDAQ:RUSH.B) 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. 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 Rush Enterprises (NASDAQ:RUSH.B). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Rush Enterprises with the means to add long-term value to shareholders.

View our latest analysis for Rush Enterprises

Rush Enterprises' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Rush Enterprises has achieved impressive annual EPS growth of 55%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. While we note Rush Enterprises achieved similar EBIT margins to last year, revenue grew by a solid 29% to US$7.7b. That's a real positive.

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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Rush Enterprises.

Are Rush Enterprises Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Rush Enterprises followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$166m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Does Rush Enterprises Deserve A Spot On Your Watchlist?

Rush Enterprises' earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Rush Enterprises very closely. We should say that we've discovered 2 warning signs for Rush Enterprises (1 is a bit unpleasant!) that you should be aware of before investing here.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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.