If EPS Growth Is Important To You, ABM Industries (NYSE:ABM) Presents An Opportunity

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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.

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 ABM Industries (NYSE:ABM). 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 ABM Industries

ABM Industries' Earnings Per Share Are 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. That makes EPS growth an attractive quality for any company. We can see that in the last three years ABM Industries grew its EPS by 11% per year. That's a good rate of growth, if it can be sustained.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note ABM Industries achieved similar EBIT margins to last year, revenue grew by a solid 18% to US$7.9b. That's a real positive.

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

Are ABM Industries Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The first bit of good news is that no ABM Industries insiders reported share sales in the last twelve months. Even better, though, is that the Executive VP and Chief Strategy & Transformation Officer, Joshua Feinberg, bought a whopping US$248k worth of shares, paying about US$39.16 per share, on average. Big buys like that may signal an opportunity; actions speak louder than words.

Along with the insider buying, another encouraging sign for ABM Industries is that insiders, as a group, have a considerable shareholding. To be specific, they have US$33m worth of shares. This considerable investment should help drive long-term value in the business. Despite being just 1.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is ABM Industries Worth Keeping An Eye On?

As previously touched on, ABM Industries is a growing business, which is encouraging. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for ABM Industries (1 is significant) you should be aware of.

The good news is that ABM Industries is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.