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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Sempra (NYSE:SRE), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

How Fast Is Sempra Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Sempra grew its EPS by 7.9% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. Unfortunately, Sempra's revenue dropped 20% last year, but the silver lining is that EBIT margins improved from 18% to 21%. While not disastrous, these figures could be better.

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.

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 Sempra's future EPS 100% free.

Are Sempra 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the real excitement comes from the US$150k that Independent Director Richard Mark spent buying shares (at an average price of about US$77.97). Strong buying like that could be a sign of opportunity.

Along with the insider buying, another encouraging sign for Sempra is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$18m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.04%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is Sempra Worth Keeping An Eye On?

As previously touched on, Sempra is a growing business, which is encouraging. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist - and arguably a research priority. However, before you get too excited we've discovered 2 warning signs for Sempra (1 is potentially serious!) that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Sempra, you'll probably love this curated collection of companies in the US that have an attractive valuation alongside 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.