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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Westinghouse Air Brake Technologies (NYSE:WAB). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Westinghouse Air Brake Technologies

How Fast Is Westinghouse Air Brake Technologies Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Westinghouse Air Brake Technologies has managed to grow EPS by 28% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. While we note Westinghouse Air Brake Technologies achieved similar EBIT margins to last year, revenue grew by a solid 16% to US$9.7b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed 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?

We would not expect to see insiders owning a large percentage of a US$25b company like Westinghouse Air Brake Technologies. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$172m. This comes in at 0.7% of shares in the company, which is a fair amount of a business of this size. 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. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Westinghouse Air Brake Technologies that you should be aware of.

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.