Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without 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.

In contrast to all that, I prefer to spend time on companies like Fisher & Paykel Healthcare (NZSE:FPH), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Fisher & Paykel Healthcare

How Fast Is Fisher & Paykel Healthcare Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Fisher & Paykel Healthcare's EPS has grown 36% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. The good news is that Fisher & Paykel Healthcare is growing revenues, and EBIT margins improved by 3.4 percentage points to 36%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Fisher & Paykel Healthcare EPS 100% free.

Are Fisher & Paykel Healthcare Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did Fisher & Paykel Healthcare insiders refrain from selling stock during the year, but they also spent NZ$157k buying it. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was Independent Non-Executive Director Lisa E. McIntyre who made the biggest single purchase, worth NZ$143k, paying NZ$32.45 per share.

Along with the insider buying, another encouraging sign for Fisher & Paykel Healthcare is that insiders, as a group, have a considerable shareholding. To be specific, they have NZ$57m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Lewis Gradon is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like Fisher & Paykel Healthcare, with market caps over NZ$12b, is about NZ$5.8m.

The Fisher & Paykel Healthcare CEO received NZ$4.0m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Should You Add Fisher & Paykel Healthcare To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Fisher & Paykel Healthcare's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. Now, you could try to make up your mind on Fisher & Paykel Healthcare by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

The good news is that Fisher & Paykel Healthcare is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.