The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Connexion Mobility (ASX:CXZ). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Connexion Mobility

Connexion Mobility's 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. Recognition must be given to the that Connexion Mobility has grown EPS by 56% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers. Getting in to the the finer details, it important to know that the EPS growth has been helped by share buybacks, demonstrating that the business is positioned to return capital to its shareholders.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While Connexion Mobility did well to grow revenue over the last year, EBIT margins were dampened at the same time. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

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.

Connexion Mobility isn't a huge company, given its market capitalisation of AU$22m. That makes it extra important to check on its balance sheet strength.

Are Connexion Mobility 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

In twelve months, insiders sold US$222 worth of Connexion Mobility shares. On a brighter note, we see that Independent Non-Executive Director Gregory Ross paid US$46k for shares, at an average acquisition price of US$0.03 per share. And that's a reason to be optimistic.

Is Connexion Mobility Worth Keeping An Eye On?

Connexion Mobility's earnings per share have been soaring, with growth rates sky high. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And may very well signal a significant inflection point for the business. If this these factors intrigue you, then an addition of Connexion Mobility to your watchlist won't go amiss. However, before you get too excited we've discovered 1 warning sign for Connexion Mobility that you should be aware of.

The good news is that Connexion Mobility 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.