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 Alliance Aviation Services (ASX:AQZ). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Alliance Aviation Services with the means to add long-term value to shareholders.

View our latest analysis for Alliance Aviation Services

Alliance Aviation Services' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Alliance Aviation Services has grown EPS by 23% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Alliance Aviation Services shareholders can take confidence from the fact that EBIT margins are up from 13% to 16%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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 we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Alliance Aviation Services?

Are Alliance Aviation Services 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, small purchases are not always indicative of conviction, and insiders don't always get it right.

Shareholders in Alliance Aviation Services will be more than happy to see insiders committing themselves to the company, spending AU$380k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. It is also worth noting that it was MD & Executive Director Scott McMillan who made the biggest single purchase, worth AU$250k, paying AU$2.84 per share.

Along with the insider buying, another encouraging sign for Alliance Aviation Services is that insiders, as a group, have a considerable shareholding. Indeed, they hold AU$32m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 7.0% of the company, demonstrating a degree of high-level alignment with shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Stewart Tully, is paid less than the median for similar sized companies. For companies with market capitalisations between AU$156m and AU$623m, like Alliance Aviation Services, the median CEO pay is around AU$1.1m.

Alliance Aviation Services' CEO took home a total compensation package worth AU$589k in the year leading up to June 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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.

Should You Add Alliance Aviation Services To Your Watchlist?

You can't deny that Alliance Aviation Services has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. These things considered, this is one stock worth watching. Still, you should learn about the 2 warning signs we've spotted with Alliance Aviation Services.

The good news is that Alliance Aviation Services 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.