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Do Enero Group's (ASX:EGG) Earnings Warrant Your Attention?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Enero Group (ASX:EGG), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Enero Group

How Fast Is Enero Group 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. We can see that in the last three years Enero Group grew its EPS by 13% per year. That growth rate is fairly good, assuming the company can keep it up.

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Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. On the one hand, Enero Group's EBIT margins fell over the last year, but on the other hand, revenue grew. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

earnings-and-revenue-history
earnings-and-revenue-history

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Enero Group?

Are Enero 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news for Enero Group shareholders is that no insiders reported selling shares in the last year. Add in the fact that Ian Rowden, the Independent Non-Executive Director of the company, paid AU$21k for shares at around AU$1.43 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

Is Enero Group Worth Keeping An Eye On?

As previously touched on, Enero Group is a growing business, which is encouraging. While some companies are struggling to grow EPS, Enero Group seems free from that morose affliction. The icing on the cake is that an insider bought shares during the year; a point of interest for people who will want to keep a watchful eye on this stock. What about risks? Every company has them, and we've spotted 3 warning signs for Enero Group (of which 1 is a bit concerning!) you should know about.

Keen growth investors love to see insider buying. Thankfully, Enero Group isn't the only one. You can see a a curated list of Australian companies which have exhibited consistent growth accompanied by recent insider buying.

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.