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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Construction Partners (NASDAQ:ROAD). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Construction Partners

How Fast Is Construction Partners Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Construction Partners' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 47%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. Construction Partners maintained stable EBIT margins over the last year, all while growing revenue 17% to US$1.8b. That's progress.

The chart below shows how the company's bottom and top lines have progressed 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 Construction Partners.

Are Construction Partners Insiders Aligned With All Shareholders?

Owing to the size of Construction Partners, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$465m. 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.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Construction Partners, with market caps between US$4.0b and US$12b, is around US$8.0m.

Construction Partners' CEO took home a total compensation package of US$2.4m in the year prior to September 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Construction Partners To Your Watchlist?

Construction Partners' earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The sharp increase in earnings could signal good business momentum. Construction Partners certainly ticks a few boxes, so we think it's probably well worth further consideration. Before you take the next step you should know about the 3 warning signs for Construction Partners that we have uncovered.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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.