If EPS Growth Is Important To You, Golden Entertainment (NASDAQ:GDEN) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Golden Entertainment (NASDAQ:GDEN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Golden Entertainment

Golden Entertainment's Improving Profits

Golden Entertainment has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that Golden Entertainment's EPS has grown from US$3.12 to US$3.70 over twelve months. That's a 19% gain; respectable growth in the broader scheme of things.

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. It's noted that Golden Entertainment's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Golden Entertainment shareholders can take confidence from the fact that EBIT margins are up from 10% to 14%, and revenue is growing. Both of which are great metrics to check off for potential growth.

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

Are Golden Entertainment Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Golden Entertainment insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at US$56m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Should You Add Golden Entertainment To Your Watchlist?

One important encouraging feature of Golden Entertainment is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. Even so, be aware that Golden Entertainment is showing 1 warning sign in our investment analysis , you should know about...

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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.