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. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 AAON (NASDAQ:AAON). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

How Quickly Is AAON Increasing Earnings Per Share?

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. Shareholders will be happy to know that AAON's EPS has grown 33% each year, compound, 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. The good news is that AAON is growing revenues, and EBIT margins improved by 5.2 percentage points to 21%, over the last year. That's great to see, on both counts.

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 AAON's future profits.

Are AAON Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$6.2b company like AAON. 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$1.1b. This totals to 17% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

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 AAON with market caps between US$4.0b and US$12b is about US$8.4m.

The AAON CEO received US$5.0m 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 AAON Deserve A Spot On Your Watchlist?

For growth investors, AAON's raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that AAON has underlying strengths that make it worth a look at. What about risks? Every company has them, and we've spotted 1 warning sign for AAON you should know about.

Although AAON 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.