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. 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. 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.

In contrast to all that, many investors prefer to focus on companies like McMillan Shakespeare (ASX:MMS), which has not only revenues, but also profits. 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.

View our latest analysis for McMillan Shakespeare

How Fast Is McMillan Shakespeare Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that McMillan Shakespeare has managed to grow EPS by 18% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It's noted that McMillan Shakespeare's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that McMillan Shakespeare is growing revenues, and EBIT margins improved by 8.0 percentage points to 30%, over the last year. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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 McMillan Shakespeare's future profits.

Are McMillan Shakespeare Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Not only did McMillan Shakespeare insiders refrain from selling stock during the year, but they also spent AU$136k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading.

Along with the insider buying, another encouraging sign for McMillan Shakespeare is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at AU$64m. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 6.0% of the shares on issue for the business, an appreciable amount considering the market cap.

Is McMillan Shakespeare Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into McMillan Shakespeare's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. These things considered, this is one stock worth watching. Still, you should learn about the 3 warning signs we've spotted with McMillan Shakespeare.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of McMillan Shakespeare, you'll probably love this curated collection of companies in AU that have an attractive valuation alongside insider buying in the last three months.

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.