For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

In contrast to all that, many investors prefer to focus on companies like HUB24 (ASX:HUB), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for HUB24

HUB24's 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. We can see that in the last three years HUB24 grew its EPS by 17% per year. That's a good rate of growth, if it can be sustained.

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 HUB24's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. HUB24 maintained stable EBIT margins over the last year, all while growing revenue 76% to AU$192m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of HUB24's forecast profits?

Are HUB24 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Shareholders in HUB24 will be more than happy to see insiders committing themselves to the company, spending AU$483k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. It is also worth noting that it was MD & Executive Director Andrew Alcock who made the biggest single purchase, worth AU$199k, paying AU$17.91 per share.

Along with the insider buying, another encouraging sign for HUB24 is that insiders, as a group, have a considerable shareholding. With a whopping AU$129m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

Does HUB24 Deserve A Spot On Your Watchlist?

One important encouraging feature of HUB24 is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for HUB24 that you should be aware of.

Keen growth investors love to see insider buying. Thankfully, HUB24 isn't the only one. You can see a a free list of them here.

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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