It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like CAR Group (ASX:CAR), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide CAR Group with the means to add long-term value to shareholders.

See our latest analysis for CAR Group

CAR Group'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. That makes EPS growth an attractive quality for any company. CAR Group's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 52%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. On the revenue front, CAR Group has done well over the past year, growing revenue by 53% to AU$781m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of CAR Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are CAR Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, 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.

The AU$1.6m worth of shares that insiders sold during the last 12 months pales in comparison to the AU$13m they spent on acquiring shares in the company. This adds to the interest in CAR Group because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Co-Founder & Non Executive Director Walter Pisciotta who made the biggest single purchase, worth AU$12m, paying AU$19.95 per share.

On top of the insider buying, it's good to see that CAR Group insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at AU$477m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Is CAR Group Worth Keeping An Eye On?

CAR Group's earnings have taken off in quite an impressive fashion. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe CAR Group deserves timely attention. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for CAR Group (1 is a bit concerning) you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of CAR Group, you'll probably love this curated collection of companies in AU that have witnessed growth alongside insider buying in the last three months.

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.