I Built A List Of Growing Companies And York Water (NASDAQ:YORW) Made The Cut

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like York Water (NASDAQ:YORW). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for York Water

How Quickly Is York Water Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, York Water has grown EPS by 8.0% per year. That growth rate is fairly good, assuming the company can keep it up.

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. While we note York Water's EBIT margins were flat over the last year, revenue grew by a solid 4.4% to US$54m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of York Water's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are York Water Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Over the last 12 months York Water insiders spent US$177k more buying shares than they received from selling them. On balance, that's a good sign. Zooming in, we can see that the biggest insider purchase was by Independent Director Jody Keller for US$25k worth of shares, at about US$46.53 per share.

I do like that insiders have been buying shares in York Water, but there is more evidence of shareholder friendly management. I refer to the very reasonable level of CEO pay. For companies with market capitalizations between US$400m and US$1.6b, like York Water, the median CEO pay is around US$2.2m.

The York Water CEO received total compensation of just US$341k in the year to . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Is York Water Worth Keeping An Eye On?

One important encouraging feature of York Water is that it is growing profits. And that's not all, folks. We've also seen insiders buying stock, and noted modest executive pay. The sum of all that, for me, points to a quality business, and a genuine prospect for further research. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with York Water , and understanding it should be part of your investment process.

The good news is that York Water is not the only growth stock with insider buying. Here's a list of them... 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. 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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