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. 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 Strategic Education (NASDAQ:STRA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Strategic Education with the means to add long-term value to shareholders.

Strategic Education's Earnings Per Share Are 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 Strategic Education grew its EPS by 17% per year. That growth rate is fairly good, assuming the company can keep it up.

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. The music to the ears of Strategic Education shareholders is that EBIT margins have grown from 5.9% to 12% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Strategic Education's forecast profits?

Are Strategic Education Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While we did see insider selling of Strategic Education stock in the last year, one single insider spent plenty more buying. Specifically the Independent Director, Viet Dinh, spent US$494k, paying about US$115 per share. It's hard to ignore news like that.

On top of the insider buying, it's good to see that Strategic Education insiders have a valuable investment in the business. With a whopping US$88m worth of shares as a group, insiders have plenty riding on the company's success. This would indicate that the goals of shareholders and management are one and the same.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Strategic Education's CEO, Karl McDonnell, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to Strategic Education, with market caps between US$2.0b and US$6.4b, is around US$6.7m.

The Strategic Education CEO received US$5.4m in compensation for the year ending December 2023. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does Strategic Education Deserve A Spot On Your Watchlist?

One important encouraging feature of Strategic Education is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. However, before you get too excited we've discovered 1 warning sign for Strategic Education that you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Strategic Education isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by high insider ownership.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com