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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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

View our latest analysis for Enact Holdings

Enact Holdings' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Enact Holdings managed to grow EPS by 14% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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. Enact Holdings maintained stable EBIT margins over the last year, all while growing revenue 5.5% to US$1.2b. That's a real positive.

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.

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

Are Enact Holdings 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The first bit of good news is that no Enact Holdings insiders reported share sales in the last twelve months. But the important part is that President Rohit Gupta spent US$270k buying stock, at an average price of US$26.97. It seems at least one insider thinks that the company is doing well - and they are backing that view with cash.

Along with the insider buying, another encouraging sign for Enact Holdings is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$15m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.3% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Enact Holdings Worth Keeping An Eye On?

One important encouraging feature of Enact Holdings is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. What about risks? Every company has them, and we've spotted 2 warning signs for Enact Holdings (of which 1 is a bit unpleasant!) you should know about.

Keen growth investors love to see insider activity. Thankfully, Enact Holdings isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by high insider ownership.

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.