Here's Why We Think Avis Budget Group (NASDAQ:CAR) 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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

View our latest analysis for Avis Budget Group

Avis Budget Group's Improving Profits

Avis Budget Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Avis Budget Group's EPS shot from US$32.69 to US$64.06, over the last year. Year on year growth of 96% is certainly a sight to behold.

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. Avis Budget Group shareholders can take confidence from the fact that EBIT margins are up from 31% to 34%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Avis Budget Group?

Are Avis Budget Group Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$9.3b company like Avis Budget Group. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. We note that their impressive stake in the company is worth US$218m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Should You Add Avis Budget Group To Your Watchlist?

Avis Budget Group's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Avis Budget Group is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. However, before you get too excited we've discovered 3 warning signs for Avis Budget Group (1 makes us a bit uncomfortable!) that you should be aware of.

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.