Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

In contrast to all that, many investors prefer to focus on companies like Otter Tail (NASDAQ:OTTR), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Otter Tail

How Fast Is Otter Tail Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Otter Tail has managed to grow EPS by 34% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Despite the relatively flat revenue figures, shareholders will be pleased to see EBIT margins have grown from 27% to 30% in the last 12 months. That's something to smile about.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Otter Tail's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Otter Tail Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Otter Tail insiders have a significant amount of capital invested in the stock. With a whopping US$69m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Otter Tail, with market caps between US$2.0b and US$6.4b, is around US$6.7m.

Otter Tail offered total compensation worth US$5.8m to its CEO in the year to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is Otter Tail Worth Keeping An Eye On?

For growth investors, Otter Tail's raw rate of earnings growth is a beacon in the night. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. The overarching message here is that Otter Tail has underlying strengths that make it worth a look at. We should say that we've discovered 2 warning signs for Otter Tail (1 is significant!) that you should be aware of before investing here.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by significant insider holdings.

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.