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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like York Water (NASDAQ:YORW). 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.

See our latest analysis for York Water

York Water's Earnings Per Share Are 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. York Water managed to grow EPS by 7.8% per year, over three years. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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. EBIT margins for York Water remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 13% to US$73m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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

Are York Water 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We note that York Water insiders spent US$84k on stock, over the last year; in contrast, we didn't see any selling. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading.

Recent insider purchases of York Water stock is not the only way management has kept the interests of the general public shareholders in mind. Specifically, the CEO is paid quite reasonably for a company of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like York Water with market caps between US$200m and US$800m is about US$2.4m.

The CEO of York Water only received US$465k in total compensation for the year ending December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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. It can also be a sign of good governance, more generally.

Is York Water Worth Keeping An Eye On?

One positive for York Water is that it is growing EPS. That's nice to see. And there's more to York Water, with the insider buying and modest CEO pay being a great look for those with an eye on the company. All things considered, York Water is certainly displaying its merits and is worthy of taking research to the next step. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with York Water (at least 1 which is significant) , and understanding these should be part of your investment process.

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