Here's Why We Think Permian Resources (NYSE:PR) Might Deserve Your Attention Today

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Permian Resources (NYSE:PR). 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.

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How Quickly Is Permian Resources Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Permian Resources' EPS has grown 36% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. The music to the ears of Permian Resources shareholders is that EBIT margins have grown from 37% to 40% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

See our latest analysis for Permian Resources

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

Are Permian Resources Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Even though there was some insider selling over the last year, that was outweighed by Director William Quinn's huge outlay of US$17m, spent buying shares. The average price paid was about US$12.68. It's not often you see purchases like this and so it should be on the radar of everyone who follows Permian Resources.

Along with the insider buying, another encouraging sign for Permian Resources is that insiders, as a group, have a considerable shareholding. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$120m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Should You Add Permian Resources To Your Watchlist?

You can't deny that Permian Resources has grown its earnings per share at a very impressive rate. That's attractive. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. However, before you get too excited we've discovered 1 warning sign for Permian Resources that you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Permian Resources isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by high insider ownership.

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.