If EPS Growth Is Important To You, Arch Resources (NYSE:ARCH) Presents An Opportunity

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. 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 Arch Resources (NYSE:ARCH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Arch Resources with the means to add long-term value to shareholders.

Check out our latest analysis for Arch Resources

How Fast Is Arch Resources Growing Its Earnings Per Share?

In the last three years Arch Resources' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Arch Resources' EPS shot from US$40.07 to US$67.32, over the last year. Year on year growth of 68% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

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. The good news is that Arch Resources is growing revenues, and EBIT margins improved by 3.6 percentage points to 29%, over the last year. That's great to see, on both counts.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Arch Resources' forecast profits?

Are Arch Resources 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Arch Resources insiders refrain from selling stock during the year, but they also spent US$186k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. It is also worth noting that it was Lead Independent Director James Chapman who made the biggest single purchase, worth US$123k, paying US$123 per share.

Along with the insider buying, another encouraging sign for Arch Resources is that insiders, as a group, have a considerable shareholding. Holding US$62m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Should You Add Arch Resources To Your Watchlist?

Arch Resources' earnings per share growth have been climbing higher at an appreciable rate. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Arch Resources deserves timely attention. What about risks? Every company has them, and we've spotted 4 warning signs for Arch Resources (of which 2 can't be ignored!) you should know about.

Keen growth investors love to see insider buying. Thankfully, Arch Resources 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.