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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 FirstCash Holdings (NASDAQ:FCFS). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for FirstCash Holdings

FirstCash Holdings' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that FirstCash Holdings has managed to grow EPS by 19% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Not all of FirstCash Holdings' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. FirstCash Holdings shareholders can take confidence from the fact that EBIT margins are up from 9.3% to 12%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of FirstCash Holdings' forecast profits?

Are FirstCash Holdings Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that FirstCash Holdings insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth US$804m. That equates to 16% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Should You Add FirstCash Holdings To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into FirstCash Holdings' strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Still, you should learn about the 1 warning sign we've spotted with FirstCash Holdings.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.