With EPS Growth And More, Good Times Restaurants (NASDAQ:GTIM) Makes An Interesting Case

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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

How Fast Is Good Times Restaurants Growing Its Earnings Per Share?

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that Good Times Restaurants grew its EPS from US$0.28 to US$1.05, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. On the revenue front, Good Times Restaurants has done well over the past year, growing revenue by 23% to US$134m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Good Times Restaurants isn't a huge company, given its market capitalisation of US$40m. That makes it extra important to check on its balance sheet strength.

Are Good Times Restaurants 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

A great takeaway for shareholders is that company insiders within Good Times Restaurants have collectively spent US$12k acquiring shares in the company. While this isn't much, we also note an absence of sales. It is also worth noting that it was Independent Director Jennifer Stetson who made the biggest single purchase, worth US$4.6k, paying US$4.24 per share.

Should You Add Good Times Restaurants To Your Watchlist?

Good Times Restaurants' earnings have taken off in quite an impressive fashion. Growth-minded people will be intrigued by the incredible movement in EPS growth. And indeed, it could be a sign that the business is at an inflection point. If this is the case, then keeping a watch over Good Times Restaurants could be in your best interest. It is worth noting though that we have found 2 warning signs for Good Times Restaurants (1 can't be ignored!) that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, Good Times Restaurants 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.