Do EnLink Midstream's (NYSE:ENLC) Earnings Warrant Your Attention?

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. 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.

In contrast to all that, many investors prefer to focus on companies like EnLink Midstream (NYSE:ENLC), which has not only revenues, but also profits. 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.

See our latest analysis for EnLink Midstream

EnLink Midstream's Improving Profits

In the last three years EnLink Midstream's 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. As a result, we'll zoom in on growth over the last year, instead. It's good to see that EnLink Midstream's EPS has grown from US$0.53 to US$0.66 over twelve months. There's little doubt shareholders would be happy with that 25% gain.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Unfortunately, EnLink Midstream's revenue dropped 27% last year, but the silver lining is that EBIT margins improved from 6.9% to 9.8%. While not disastrous, these figures could be better.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

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 EnLink Midstream's future profits.

Are EnLink Midstream Insiders Aligned With All Shareholders?

Owing to the size of EnLink Midstream, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. To be specific, they have US$29m worth of shares. This considerable investment should help drive long-term value in the business. Despite being just 0.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is EnLink Midstream Worth Keeping An Eye On?

One positive for EnLink Midstream is that it is growing EPS. That's nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Before you take the next step you should know about the 2 warning signs for EnLink Midstream (1 is concerning!) that we have uncovered.

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.