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. 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.

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 Catalyst Pharmaceuticals (NASDAQ:CPRX). 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.

Our free stock report includes 1 warning sign investors should be aware of before investing in Catalyst Pharmaceuticals. Read for free now.

Catalyst Pharmaceuticals' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Catalyst Pharmaceuticals' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 52%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. Catalyst Pharmaceuticals shareholders can take confidence from the fact that EBIT margins are up from 22% to 40%, and revenue is growing. That's great to see, on both counts.

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.

View our latest analysis for Catalyst Pharmaceuticals

Fortunately, we've got access to analyst forecasts of Catalyst Pharmaceuticals' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Catalyst Pharmaceuticals Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Catalyst Pharmaceuticals shares worth a considerable sum. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$215m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Does Catalyst Pharmaceuticals Deserve A Spot On Your Watchlist?

Catalyst Pharmaceuticals' earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Catalyst Pharmaceuticals for a spot on your watchlist. It is worth noting though that we have found 1 warning sign for Catalyst Pharmaceuticals that you need to take into consideration.

Although Catalyst Pharmaceuticals 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.