Here's Why VAALCO Energy (NYSE:EGY) Has Caught The Eye Of Investors

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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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

How Quickly Is VAALCO Energy Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Over the last three years, VAALCO Energy has grown EPS by 5.1% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that VAALCO Energy is growing revenues, and EBIT margins improved by 11.0 percentage points to 36%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for VAALCO Energy.

Are VAALCO Energy 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

In twelve months, insiders sold US$12k worth of VAALCO Energy shares. On the other hand, CEO & Director George Maxwell paid US$21k for shares, at a price of about US$4.68 per share. Overall, that is something good to take away.

Is VAALCO Energy Worth Keeping An Eye On?

One important encouraging feature of VAALCO Energy is that it is growing profits. While some companies are struggling to grow EPS, VAALCO Energy seems free from that morose affliction. The cherry on top is that we have an insider buying shares. A further encouragement to keep an eye on this stock. However, before you get too excited we've discovered 1 warning sign for VAALCO Energy that you should be aware of.

The good news is that VAALCO Energy is not the only stock with insider buying. Here's a list of small cap, undervalued companies in the US with insider buying in the last three months!

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.