Does BGSF (NYSE:BGSF) Deserve A Spot On Your Watchlist?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like BGSF (NYSE:BGSF). 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 BGSF

BGSF's Earnings Per Share Are Growing

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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years BGSF grew its EPS by 4.1% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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 BGSF achieved similar EBIT margins to last year, revenue grew by a solid 24% to US$298m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since BGSF is no giant, with a market capitalisation of US$132m, you should definitely check its cash and debt before getting too excited about its prospects.

Are BGSF 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Shareholders in BGSF will be more than happy to see insiders committing themselves to the company, spending US$360k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. It is also worth noting that it was Independent Director Douglas Hailey who made the biggest single purchase, worth US$254k, paying US$12.68 per share.

Does BGSF Deserve A Spot On Your Watchlist?

One important encouraging feature of BGSF is that it is growing profits. It's not easy for business to grow EPS, but BGSF has shown the strengths to do just that. The real kicker is that insiders have been accumulating, suggesting that those who understand the company best see some potential. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with BGSF (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.

Keen growth investors love to see insider buying. Thankfully, BGSF isn't the only one. You can see a 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.