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.'  While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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

Quanex Building Products' 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 means EPS growth is considered a real positive by most successful long-term investors.   Shareholders will be happy to know that Quanex Building Products' EPS has grown 23% each year, compound, over three years.   If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.  

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.    While Quanex Building Products may have maintained EBIT margins over the last year, revenue has fallen.  This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.  

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

NYSE:NX Earnings and Revenue History April 13th 2024

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Quanex Building Products' forecast profits?

Are Quanex Building Products Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market.  Shareholders will be pleased by the fact that insiders own Quanex Building Products shares worth a considerable sum.     To be specific, they have US$16m worth of shares.  This considerable investment should help drive long-term value in the business.   Despite being just 1.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.  

Is Quanex Building Products Worth Keeping An Eye On?

You can't deny that Quanex Building Products has grown its earnings per share at a very impressive rate. That's attractive.   Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Quanex Building Products' continuing strength.  The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value.     Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Quanex Building Products.  

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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.