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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in CECO Environmental (NASDAQ:CECO). 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.

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CECO Environmental's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. Commendations have to be given in seeing that CECO Environmental grew its EPS from US$0.36 to US$1.35, in one short year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future.

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. EBIT margins for CECO Environmental remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 8.9% to US$608m. That's a real positive.

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.

See our latest analysis for CECO Environmental

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for CECO Environmental?

Are CECO Environmental 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

While we did see insider selling of CECO Environmental stock in the last year, one single insider spent plenty more buying. Namely, Independent Director Richard Wallman out-laid US$873k for shares, at about US$25.68 per share. It's hard to ignore news like that.

The good news, alongside the insider buying, for CECO Environmental bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at US$49m. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 7.2% of the shares on issue for the business, an appreciable amount considering the market cap.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because CECO Environmental's CEO, Todd Gleason, 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 CECO Environmental, with market caps between US$400m and US$1.6b, is around US$3.9m.

The CECO Environmental CEO received US$3.1m in compensation for the year ending December 2024. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does CECO Environmental Deserve A Spot On Your Watchlist?

CECO Environmental's earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest CECO Environmental belongs near the top of your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for CECO Environmental (1 doesn't sit too well with us) you should be aware of.

Keen growth investors love to see insider activity. Thankfully, CECO Environmental 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.