Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

In contrast to all that, many investors prefer to focus on companies like Transurban Group (ASX:TCL), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Transurban Group

Transurban Group's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. It's an outstanding feat for Transurban Group to have grown EPS from AU$0.021 to AU$0.11 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement.

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. While revenue is looking a bit flat, the good news is EBIT margins improved by 3.5 percentage points to 27%, in the last twelve months. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Transurban Group's future EPS 100% free.

Are Transurban Group 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news for Transurban Group shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Gary Lennon, the Independent Non-Executive Director of the company, paid AU$53k for shares at around AU$13.17 each. It seems that at least one insider is prepared to show the market there is potential within Transurban Group.

It's commendable to see that insiders have been buying shares in Transurban Group, but there is more evidence of shareholder friendly management. Namely, Transurban Group has a very reasonable level of CEO pay. The median total compensation for CEOs of companies similar in size to Transurban Group, with market caps over AU$13b, is around AU$6.7m.

The Transurban Group CEO received AU$3.9m in compensation for the year ending June 2024. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Transurban Group Worth Keeping An Eye On?

Transurban Group's earnings per share growth have been climbing higher at an appreciable rate. The company can also boast of insider buying, and reasonable remuneration for the CEO. The strong EPS growth suggests Transurban Group may be at an inflection point. For those attracted to fast growth, we'd suggest this stock merits monitoring. However, before you get too excited we've discovered 2 warning signs for Transurban Group that you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Transurban Group isn't the only one. You can see a a curated list of Australian 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.