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 Shift4 Payments (NYSE:FOUR). 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.

Shift4 Payments' Improving Profits

Over the last three years, Shift4 Payments has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. In previous twelve months, Shift4 Payments' EPS has risen from US$1.75 to US$1.90. That's a modest gain of 8.5%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Shift4 Payments remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 31% to US$3.1b. That's progress.

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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Shift4 Payments' future profits.

Are Shift4 Payments Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

While there was some insider selling, that pales in comparison to the US$11m that the Founder, Jared Isaacman spent acquiring shares. We should note the average purchase price was around US$66.96. It's not often you see purchases like this and so it should be on the radar of everyone who follows Shift4 Payments.

On top of the insider buying, it's good to see that Shift4 Payments insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$262m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Shift4 Payments To Your Watchlist?

As previously touched on, Shift4 Payments is a growing business, which is encouraging. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Shift4 Payments (1 is significant) you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Shift4 Payments, you'll probably love this curated collection of companies in the US that have an attractive valuation 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.