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.  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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like EnLink Midstream (NYSE:ENLC). 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 EnLink Midstream

EnLink Midstream's Improving Profits

In the last three years EnLink Midstream's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates.  Thus, it makes sense to focus on more recent growth rates, instead.    EnLink Midstream's EPS has risen over the last 12 months, growing from US$0.53 to US$0.66.  This amounts to a 25% gain; a figure that shareholders will be pleased to see.  

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.    EnLink Midstream's EBIT margins have actually improved by 2.9 percentage points in the last year, to reach 9.8%, but, on the flip side, revenue was down 27%.  That falls short of ideal.  

You can take a look at the company's revenue and earnings growth trend, in the chart below.  For finer detail, click on the image.

NYSE:ENLC Earnings and Revenue History January 3rd 2024

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for EnLink Midstream's future EPS 100% free.  

Are EnLink Midstream Insiders Aligned With All Shareholders?

Since EnLink Midstream has a market capitalisation of US$5.7b, we wouldn't expect insiders to hold a large percentage of shares.  But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders.     To be specific, they have US$27m worth of shares.  That's a lot of money, and no small incentive to work hard.   Even though that's only about 0.5% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.  

Should You Add EnLink Midstream To Your Watchlist?

One positive for EnLink Midstream is that it is growing EPS. That's nice to see.   To add an extra spark to the fire, significant insider ownership in the company is another highlight.  The combination definitely favoured by investors so consider keeping the company on a watchlist.     We don't want to rain on the parade too much, but we did also find 2 warning signs for EnLink Midstream (1 is a bit concerning!) that you need to be mindful of.  

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.