Here's Why We Think GWA Group (ASX:GWA) Might Deserve Your Attention Today

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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 GWA Group (ASX:GWA). 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 GWA Group

How Quickly Is GWA Group Increasing Earnings Per Share?

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 GWA Group grew its EPS by 4.9% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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. GWA Group's EBIT margins are flat but, worryingly, its revenue is actually down. While this may raise concerns, investors should investigate the reasoning behind this.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of GWA Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are GWA Group Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

We note that GWA Group insiders spent AU$247k on stock, over the last year; in contrast, we didn't see any selling. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. We also note that it was the MD, CEO & Executive Director, Urs Meyerhans, who made the biggest single acquisition, paying AU$147k for shares at about AU$1.64 each.

On top of the insider buying, it's good to see that GWA Group insiders have a valuable investment in the business. Indeed, they hold AU$40m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 5.6% of the shares on issue for the business, an appreciable amount considering the market cap.

Should You Add GWA Group To Your Watchlist?

One positive for GWA Group is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Even so, be aware that GWA Group is showing 1 warning sign in our investment analysis , you should know about...

The good news is that GWA Group is not the only growth stock with insider buying. Here's a list of growth-focused companies in AU 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.

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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.