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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'  A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like ABM Industries (NYSE:ABM), which has not only revenues, but also profits.  Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide ABM Industries with the means to add long-term value to shareholders.

How Fast Is ABM Industries Growing Its Earnings Per Share?

In the last three years ABM Industries' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates.  Thus, it makes sense to focus on more recent growth rates, instead.    ABM Industries' EPS shot up from US$2.89 to US$4.07; a result that's bound to keep shareholders happy.  That's a commendable gain of 41%.  

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth.    ABM Industries maintained stable EBIT margins over the last year, all while growing revenue 4.0% to US$8.2b.  That's a real positive.  

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

NYSE:ABM Earnings and Revenue History April 24th 2024

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 ABM Industries' future EPS 100% free.  

Are ABM Industries 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 ABM Industries shares worth a considerable sum.     As a matter of fact, their holding is valued at US$40m.  That's a lot of money, and no small incentive to work hard.   Despite being just 1.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.  

Should You Add ABM Industries To Your Watchlist?

For growth investors, ABM Industries' raw rate of earnings growth is a beacon in the night.   This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares.  On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research.     It's still necessary to consider the ever-present spectre of investment risk.   We've identified 4 warning signs with ABM Industries (at least 1 which is a bit concerning)  , and understanding these should be part of your investment process.  

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.