If EPS Growth Is Important To You, Westinghouse Air Brake Technologies (NYSE:WAB) Presents An Opportunity

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Westinghouse Air Brake Technologies (NYSE:WAB). 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.

See our latest analysis for Westinghouse Air Brake Technologies

How Quickly Is Westinghouse Air Brake Technologies Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Westinghouse Air Brake Technologies has grown EPS by 21% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Westinghouse Air Brake Technologies maintained stable EBIT margins over the last year, all while growing revenue 16% to US$9.5b. That's a real positive.

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 Westinghouse Air Brake Technologies' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Westinghouse Air Brake Technologies Insiders Aligned With All Shareholders?

Owing to the size of Westinghouse Air Brake Technologies, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$140m. We note that this amounts to 0.6% of the company, which may be small owing to the sheer size of Westinghouse Air Brake Technologies but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.

Is Westinghouse Air Brake Technologies Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Westinghouse Air Brake Technologies' strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Westinghouse Air Brake Technologies' continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of Westinghouse Air Brake Technologies. You might benefit from giving it a glance today.

Although Westinghouse Air Brake Technologies certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of companies that not only boast of strong growth but have also seen recent insider 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.