Here's Why We Think Select Water Solutions (NYSE:WTTR) Might Deserve Your Attention Today

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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

See our latest analysis for Select Water Solutions

Select Water Solutions' Improving Profits

In the last three years Select Water Solutions' 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. Select Water Solutions' EPS skyrocketed from US$0.51 to US$0.73, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 44%.

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. EBIT margins for Select Water Solutions remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to US$1.6b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Select Water Solutions' future EPS 100% free.

Are Select Water Solutions Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Select Water Solutions followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have US$36m worth of shares. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 3.8%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is Select Water Solutions Worth Keeping An Eye On?

For growth investors, Select Water Solutions' raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. It is worth noting though that we have found 2 warning signs for Select Water Solutions that you need to take into consideration.

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 tailored list of companies which have demonstrated growth backed by recent insider purchases.

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.