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. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Applied Industrial Technologies (NYSE:AIT). 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.

See our latest analysis for Applied Industrial Technologies

How Fast Is Applied Industrial Technologies Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Applied Industrial Technologies has managed to grow EPS by 32% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Applied Industrial Technologies maintained stable EBIT margins over the last year, all while growing revenue 19% to US$4.2b. That's progress.

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.

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 Applied Industrial Technologies?

Are Applied Industrial Technologies Insiders Aligned With All Shareholders?

Since Applied Industrial Technologies has a market capitalisation of US$5.4b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Holding US$90m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This would indicate that the goals of shareholders and management are one and the same.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between US$4.0b and US$12b, like Applied Industrial Technologies, the median CEO pay is around US$8.3m.

Applied Industrial Technologies' CEO took home a total compensation package worth US$5.8m in the year leading up to June 2022. 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. It can also be a sign of a culture of integrity, in a broader sense.

Is Applied Industrial Technologies Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Applied Industrial Technologies' strong EPS growth. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. Everyone has their own preferences when it comes to investing but it definitely makes Applied Industrial Technologies look rather interesting indeed. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Applied Industrial Technologies is trading on a high P/E or a low P/E, relative to its industry.

Although Applied Industrial Technologies certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.