Do Main Street Capital's (NYSE:MAIN) Earnings Warrant Your Attention?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. 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 Main Street Capital (NYSE:MAIN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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Main Street Capital's 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Main Street Capital has grown EPS by 6.2% 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. It's noted that Main Street Capital's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Main Street Capital maintained stable EBIT margins over the last year, all while growing revenue 8.1% to US$541m. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Check out our latest analysis for Main Street Capital

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Main Street Capital's future profits .

Are Main Street Capital Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Main Street Capital insiders have a significant amount of capital invested in the stock. We note that their impressive stake in the company is worth US$169m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Is Main Street Capital Worth Keeping An Eye On?

As previously touched on, Main Street Capital is a growing business, which is encouraging. To add an extra spark to the fire, significant insider ownership in the company is another highlight. The combination definitely favoured by investors so consider keeping the company on a watchlist. We should say that we've discovered 5 warning signs for Main Street Capital (2 are concerning!) that you should be aware of before investing here.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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.