Is Now The Time To Put GCP Applied Technologies (NYSE:GCP) On Your Watchlist?

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 completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like GCP Applied Technologies (NYSE:GCP). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for GCP Applied Technologies

GCP Applied Technologies's Improving Profits

Over the last three years, GCP Applied Technologies has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, GCP Applied Technologies's EPS shot from US$0.75 to US$1.45, over the last year. You don't see 93% year-on-year growth like that, very often.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. GCP Applied Technologies's EBIT margins are flat but, of some concern, its revenue is actually down. Suffice it to say that is not a great sign of growth.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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

Are GCP Applied Technologies Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.

We do note that, in the last year, insiders sold -US$17k worth of shares. But that's far less than the US$1.1m insiders spend purchasing stock. I find this encouraging because it suggests they are optimistic about the GCP Applied Technologies's future. It is also worth noting that it was Director Robert Yanker who made the biggest single purchase, worth US$616k, paying US$15.40 per share.

Along with the insider buying, another encouraging sign for GCP Applied Technologies is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$22m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.3% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is GCP Applied Technologies Worth Keeping An Eye On?

GCP Applied Technologies's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe GCP Applied Technologies deserves timely attention. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for GCP Applied Technologies that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of GCP Applied Technologies, you'll probably love this free list of growing companies that insiders are buying.

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. 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.
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