We Ran A Stock Scan For Earnings Growth And Sonic Automotive (NYSE:SAH) Passed With Ease

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Sonic Automotive (NYSE:SAH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Sonic Automotive with the means to add long-term value to shareholders.

Check out our latest analysis for Sonic Automotive

How Quickly Is Sonic Automotive Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Sonic Automotive's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 56%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Sonic Automotive's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Sonic Automotive maintained stable EBIT margins over the last year, all while growing revenue 18% to US$13b. That's progress.

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

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 Sonic Automotive's future EPS 100% free.

Are Sonic Automotive 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While there was some insider selling, that pales in comparison to the US$5.5m that the company insider, Paul Rusnak spent acquiring shares. The average price paid was about US$41.87. Big purchases like that are well worth noting, especially for those who like to follow the insider money.

On top of the insider buying, it's good to see that Sonic Automotive insiders have a valuable investment in the business. We note that their impressive stake in the company is worth US$411m. This totals to 20% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Very encouraging.

Is Sonic Automotive Worth Keeping An Eye On?

Sonic Automotive's earnings per share growth have been climbing higher at an appreciable rate. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Sonic Automotive belongs near the top of your watchlist. Even so, be aware that Sonic Automotive is showing 3 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

Keen growth investors love to see insider buying. Thankfully, Sonic Automotive isn't the only one. You can see a 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.