Does Arko (NASDAQ:ARKO) Deserve A Spot On Your Watchlist?

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. 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 Arko (NASDAQ:ARKO). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Arko

How Fast Is Arko Growing Its Earnings Per Share?

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So for many budding investors, improving EPS is considered a good sign. It's an outstanding feat for Arko to have grown EPS from US$0.07 to US$0.64 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. This could point to the business hitting a point of inflection.

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. Arko maintained stable EBIT margins over the last year, all while growing revenue 50% to US$8.5b. That's progress.

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.

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 Arko's future profits.

Are Arko Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Arko followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$323m. That equates to 28% of the company, making insiders powerful and aligned with other shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

Is Arko Worth Keeping An Eye On?

Arko's earnings have taken off in quite an impressive fashion. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Arko is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. What about risks? Every company has them, and we've spotted 1 warning sign for Arko you should know about.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.