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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 United Oil & Gas (LON:UOG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide United Oil & Gas with the means to add long-term value to shareholders.

Check out our latest analysis for United Oil & Gas

United Oil & Gas' Improving Profits

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 is awe-striking that United Oil & Gas' EPS went from US$0.0018 to US$0.0068 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of United Oil & Gas' 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. The music to the ears of United Oil & Gas shareholders is that EBIT margins have grown from 36% to 56% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Since United Oil & Gas is no giant, with a market capitalisation of UK£7.9m, you should definitely check its cash and debt before getting too excited about its prospects.

Are United Oil & Gas Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.

One positive for United Oil & Gas, is that company insiders spent US$25k acquiring shares in the last year. While this investment may be modest, it is great considering the lack of insider selling. It is also worth noting that it was Company Secretary Peter Dunne who made the biggest single purchase, worth UK£10.0k, paying UK£0.017 per share.

Is United Oil & Gas Worth Keeping An Eye On?

United Oil & Gas' earnings per share growth have been climbing higher at an appreciable rate. Growth-minded people will be intrigued by the incredible movement in EPS growth. And indeed, it could be a sign that the business is at an inflection point. If that's the case, you may regret neglecting to put United Oil & Gas on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with United Oil & Gas , and understanding these should be part of your investment process.

The good news is that United Oil & Gas 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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