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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Acumentis Group (ASX:ACU). 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.

See our latest analysis for Acumentis Group

Acumentis Group's Improving Profits

In the last three years Acumentis Group's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Acumentis Group's EPS grew from AU$0.0023 to AU$0.0064, over the previous 12 months. It's not often a company can achieve year-on-year growth of 184%.

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. While we note Acumentis Group achieved similar EBIT margins to last year, revenue grew by a solid 4.6% to AU$56m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Acumentis Group is no giant, with a market capitalisation of AU$18m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Acumentis Group Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Acumentis Group insiders refrain from selling stock during the year, but they also spent AU$217k buying it. This is a good look for the company as it paints an optimistic picture for the future. It is also worth noting that it was company insider Noel Kagi who made the biggest single purchase, worth AU$203k, paying AU$0.073 per share.

Is Acumentis Group Worth Keeping An Eye On?

Acumentis Group's earnings per share growth have been climbing higher at an appreciable rate. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And indeed, it could be a sign that the business is at an inflection point. If this these factors intrigue you, then an addition of Acumentis Group to your watchlist won't go amiss. Even so, be aware that Acumentis Group is showing 3 warning signs in our investment analysis , you should know about...

The good news is that Acumentis Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in AU 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.