For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

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 Consolidated Water (NASDAQ:CWCO). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Consolidated Water with the means to add long-term value to shareholders.

See our latest analysis for Consolidated Water

How Fast Is Consolidated Water Growing Its Earnings Per Share?

Consolidated Water has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Consolidated Water boosted its trailing twelve month EPS from US$1.46 to US$1.66, in the last year. That's a 14% gain; respectable growth in the broader scheme of things.

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. Consolidated Water maintained stable EBIT margins over the last year, all while growing revenue 2.2% to US$159m. That's progress.

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.

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 Consolidated Water?

Are Consolidated Water Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Consolidated Water insiders have a significant amount of capital invested in the stock. To be specific, they have US$25m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 6.0% of the company, demonstrating a degree of high-level alignment with shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Consolidated Water with market caps between US$200m and US$800m is about US$2.2m.

Consolidated Water offered total compensation worth US$1.4m to its CEO in the year to December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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 a culture of integrity, in a broader sense.

Is Consolidated Water Worth Keeping An Eye On?

As previously touched on, Consolidated Water is a growing business, which is encouraging. Earnings growth might be the main attraction for Consolidated Water, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. It is worth noting though that we have found 1 warning sign for Consolidated Water that you need to take into consideration.

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.