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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Mastercard (NYSE:MA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

How Fast Is Mastercard Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Mastercard's EPS has grown 25% 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.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Mastercard achieved similar EBIT margins to last year, revenue grew by a solid 13% to US$26b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Mastercard's future EPS 100% free.

Are Mastercard Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

First and foremost; there we saw no insiders sell Mastercard shares in the last year. Even better, though, is that the Independent Director, Richard Davis, bought a whopping US$391k worth of shares, paying about US$391 per share, on average. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

Along with the insider buying, another encouraging sign for Mastercard is that insiders, as a group, have a considerable shareholding. Notably, they have an enviable stake in the company, worth US$171m. While that is a lot of skin in the game, we note this holding only totals to 0.04% of the business, which is a result of the company being so large. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

Should You Add Mastercard To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Mastercard's strong EPS growth. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. Astute investors will want to keep this stock on watch. Still, you should learn about the 1 warning sign we've spotted with Mastercard.

Keen growth investors love to see insider activity. Thankfully, Mastercard 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