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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Taylor Morrison Home (NYSE:TMHC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Taylor Morrison Home with the means to add long-term value to shareholders.

View our latest analysis for Taylor Morrison Home

How Quickly Is Taylor Morrison Home Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that Taylor Morrison Home has grown EPS by 55% 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.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Our analysis has highlighted that Taylor Morrison Home's revenue from operations did not account for all of their revenue last year, so our analysis of its margins might not accurately reflect the underlying business. The good news is that Taylor Morrison Home is growing revenues, and EBIT margins improved by 5.4 percentage points to 15%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Taylor Morrison Home.

Are Taylor Morrison Home 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. So it is good to see that Taylor Morrison Home insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth US$131m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.