Here's Why We Think Acuity Brands (NYSE:AYI) Might Deserve Your Attention Today

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. 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.

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 Acuity Brands (NYSE:AYI). 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 Acuity Brands

Acuity Brands' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. We can see that in the last three years Acuity Brands grew its EPS by 13% per year. That growth rate is fairly good, assuming the company can keep it up.

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. EBIT margins for Acuity Brands remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 16% to US$4.0b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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

Are Acuity Brands 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

With strong conviction, Acuity Brands insiders have stood united by refusing to sell shares over the last year. But more importantly, Independent Director Laura O'Shaughnessy spent US$100k acquiring shares, doing so at an average price of US$175. Purchases like this clue us in to the to the faith management has in the business' future.

Along with the insider buying, another encouraging sign for Acuity Brands is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at US$33m. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.6% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Acuity Brands To Your Watchlist?

As previously touched on, Acuity Brands is a growing business, which is encouraging. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Now, you could try to make up your mind on Acuity Brands by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Acuity Brands, you'll probably love this free list of growing companies that insiders are 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.