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. 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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like BJ's Wholesale Club Holdings (NYSE:BJ). 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.

How Fast Is BJ's Wholesale Club Holdings Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. BJ's Wholesale Club Holdings managed to grow EPS by 9.8% per year, over three years. That's a good rate of growth, if it can be sustained.

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. EBIT margins for BJ's Wholesale Club Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 5.1% to US$20b. That's a real positive.

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.

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 BJ's Wholesale Club Holdings.

Are BJ's Wholesale Club Holdings Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$10b company like BJ's Wholesale Club Holdings. But we do take comfort from the fact that they are investors in the company. Given insiders own a significant chunk of shares, currently valued at US$93m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations over US$8.0b, like BJ's Wholesale Club Holdings, the median CEO pay is around US$13m.

The BJ's Wholesale Club Holdings CEO received US$11m in compensation for the year ending February 2024. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add BJ's Wholesale Club Holdings To Your Watchlist?

One important encouraging feature of BJ's Wholesale Club Holdings is that it is growing profits. The growth of EPS may be the eye-catching headline for BJ's Wholesale Club Holdings, but there's more to bring joy for shareholders. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. What about risks? Every company has them, and we've spotted 1 warning sign for BJ's Wholesale Club Holdings you should know about.

Although BJ's Wholesale Club Holdings certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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.