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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Hyatt Hotels (NYSE:H). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Hyatt Hotels' Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. It is awe-striking that Hyatt Hotels' EPS went from US$4.61 to US$14.35 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement.

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. Our analysis has highlighted that Hyatt Hotels' revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Hyatt Hotels maintained stable EBIT margins over the last year, all while growing revenue 4.0% to US$6.5b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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 Hyatt Hotels' future profits.

Are Hyatt Hotels Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$15b company like Hyatt Hotels. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$1.7b. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Is Hyatt Hotels Worth Keeping An Eye On?

Hyatt Hotels' earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Hyatt Hotels for a spot on your watchlist. However, before you get too excited we've discovered 3 warning signs for Hyatt Hotels (1 is potentially serious!) that you should be aware of.

Although Hyatt Hotels 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.