The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Mader Group (ASX:MAD). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Mader Group with the means to add long-term value to shareholders.

View our latest analysis for Mader Group

Mader Group's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Mader Group has managed to grow EPS by 27% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. Mader Group maintained stable EBIT margins over the last year, all while growing revenue 43% to AU$497m. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

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 Mader Group's future EPS 100% free.

Are Mader Group 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. Because often, 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.

It's nice to see that there have been no reports of any insiders selling shares in Mader Group in the previous 12 months. With that in mind, it's heartening that Justin Nuich, the CEO & Executive Director of the company, paid AU$30k for shares at around AU$3.22 each. It seems that at least one insider is prepared to show the market there is potential within Mader Group.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Mader Group will reveal that insiders own a significant piece of the pie. In fact, they own 77% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. That means they have plenty of their own capital riding on the performance of the business!

Does Mader Group Deserve A Spot On Your Watchlist?

You can't deny that Mader Group has grown its earnings per share at a very impressive rate. That's attractive. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. These things considered, this is one stock worth watching. It is worth noting though that we have found 2 warning signs for Mader Group (1 doesn't sit too well with us!) that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, Mader Group 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.

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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