Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In contrast to all that, I prefer to spend time on companies like Bell Financial Group (ASX:BFG), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Bell Financial Group

Bell Financial Group's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Bell Financial Group's EPS has grown 23% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Bell Financial Group's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Bell Financial Group maintained stable EBIT margins over the last year, all while growing revenue 19% to AU$293m. That's progress.

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.

 earnings-and-revenue-history

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Bell Financial Group Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Like a sturdy phalanx Bell Financial Group insiders have stood united by refusing to sell shares over the last year. But my excitement comes from the AU$255k that Executive Chairman & MD Alastair Provan spent buying shares (at an average price of about AU$1.27).

On top of the insider buying, it's good to see that Bell Financial Group insiders have a valuable investment in the business. To be specific, they have AU$54m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 9.6% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Bell Financial Group To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Bell Financial Group's strong EPS growth. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So it's fair to say I think this stock may well deserve a spot on your watchlist. Before you take the next step you should know about the 1 warning sign for Bell Financial Group that we have uncovered.

The good news is that Bell Financial Group is not the only growth stock with insider buying. Here's  a list of them... 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.

This article by Simply Wall St is general in nature. 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.

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