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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Atmus Filtration Technologies (NYSE:ATMU). 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.

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Atmus Filtration Technologies' Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. In previous twelve months, Atmus Filtration Technologies' EPS has risen from US$2.06 to US$2.24. That's a modest gain of 8.9%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Atmus Filtration Technologies remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 2.5% to US$1.7b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Check out our latest analysis for Atmus Filtration Technologies

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 Atmus Filtration Technologies' future EPS 100% free.

Are Atmus Filtration Technologies Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Any way you look at it Atmus Filtration Technologies shareholders can gain quiet confidence from the fact that insiders shelled out US$460k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Chairman Stephen Macadam for US$260k worth of shares, at about US$31.56 per share.

The good news, alongside the insider buying, for Atmus Filtration Technologies bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$17m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. 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.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Steph Disher is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations between US$2.0b and US$6.4b, like Atmus Filtration Technologies, the median CEO pay is around US$6.8m.

Atmus Filtration Technologies offered total compensation worth US$6.1m to its CEO in the year to December 2024. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Atmus Filtration Technologies To Your Watchlist?

One important encouraging feature of Atmus Filtration Technologies is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. It is worth noting though that we have found 2 warning signs for Atmus Filtration Technologies that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Atmus Filtration Technologies, 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.

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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.