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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like National Storage REIT (ASX:NSR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide National Storage REIT with the means to add long-term value to shareholders.

Check out our latest analysis for National Storage REIT

National Storage REIT's Earnings Per Share Are 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that National Storage REIT has grown EPS by 41% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. It's noted that National Storage REIT's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note National Storage REIT achieved similar EBIT margins to last year, revenue grew by a solid 28% to AU$278m. That's encouraging news for the company!

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.

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 National Storage REIT?

Are National Storage REIT 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. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Any way you look at it National Storage REIT shareholders can gain quiet confidence from the fact that insiders shelled out AU$304k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Director Scott Smith for AU$243k worth of shares, at about AU$2.43 per share.

The good news, alongside the insider buying, for National Storage REIT bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at AU$46m. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 1.7% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does National Storage REIT Deserve A Spot On Your Watchlist?

National Storage REIT's earnings have taken off in quite an impressive fashion. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe National Storage REIT deserves timely attention. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with National Storage REIT , and understanding these should be part of your investment process.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of National Storage REIT, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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