For beginners, it can be a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it doesn’t currently have a track record of sales and profits. But as Peter Lynch points out in One step ahead on Wall Street“Long-term risky investments almost never pay off.” Loss-making companies are in a race against time to achieve financial sustainability, so investors in these companies may take more risk than necessary.

Although we are in the era of high-sky investing in technology stocks, many investors still follow a more traditional strategy. They buy shares of profitable companies such as Apple (NASDAQ:AAPL). While this doesn’t necessarily mean the company is undervalued, the company’s profitability is enough to justify some appreciation – especially if it’s growing.

Check out our latest analysis for Apple

How quickly does Apple increase earnings per share?

If a company can grow its earnings per share (EPS) long enough, its share price should eventually follow. This means that EPS growth is viewed as a real positive by most successful long-term investors. We can see that Apple has grown its EPS by 9.1% per year over the past three years. That’s a good growth rate if it can be sustained.

A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help assess the sustainability of recent earnings growth. Despite the relatively stagnant revenue figures, shareholders will be pleased to see that EBIT margins have increased from 29% to 31% over the past 12 months. This is a good sign for the company.

You can see the company’s revenue and earnings growth trend in the graph below. Click on the graph to see the actual numbers.

Although we live in the present, there is little doubt that the future is of paramount importance when making investment decisions. Check out this interactive chart showing future EPS estimates for Apple.

Are Apple insiders on the same page as all shareholders?

We wouldn’t expect insiders to own a large stake in a $3.4 trillion company like Apple. But we are reassured that they are investors in the company. In fact, they have invested a significant portion of their wealth in it, currently valued at $2.1 billion. That represents 0.06% of the company’s shares, which is a significant amount for a company of its size. This shows shareholders that there is a certain level of alignment between them and management.

Is it worth keeping an eye on Apple?

On the plus side for Apple, earnings per share are growing, which is nice to see. To add fuel to the fire, another plus point is that the company has a significant amount of insider ownership. These two factors are a big plus for the company, which should be a strong candidate for your watch list. We don’t want to spoil things too much, but we also noticed 2 warning signs for Apple that you need to consider.

The story continues

While choosing stocks without growing earnings and without insider buying can certainly produce results, for investors who value these key metrics, here is a carefully curated list of U.S. companies with promising growth potential and insider confidence.

Please note that the insider transactions discussed in this article are reportable transactions in the respective jurisdiction.

Do you have feedback on this article? Are you concerned about the content? Contact us directly from us. Alternatively, send an email to editorial-team (at) simplywallst.com.

This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.