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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Black Hills (NYSE:BKH). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Black Hills' Improving Profits

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. Black Hills has grown its trailing twelve month EPS from US$3.72 to US$3.95, in the last year. That's a fair increase of 6.2%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Unfortunately, Black Hills' revenue dropped 18% last year, but the silver lining is that EBIT margins improved from 17% to 23%. While not disastrous, these figures could be better.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Black Hills' future profits.

Are Black Hills Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Black Hills shares worth a considerable sum. To be specific, they have US$22m worth of shares. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.5%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Black Hills with market caps between US$2.0b and US$6.4b is about US$6.8m.

The Black Hills CEO received US$5.6m in compensation for the year ending December 2023. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Black Hills Deserve A Spot On Your Watchlist?

One important encouraging feature of Black Hills is that it is growing profits. The fact that EPS is growing is a genuine positive for Black Hills, but the pleasant picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. We should say that we've discovered 3 warning signs for Black Hills (1 is concerning!) that you should be aware of before investing here.

Although Black Hills certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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.