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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Ark Restaurants (NASDAQ:ARKR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ark Restaurants with the means to add long-term value to shareholders.

View our latest analysis for Ark Restaurants

How Quickly Is Ark Restaurants Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Recognition must be given to the that Ark Restaurants has grown EPS by 53% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Ark Restaurants shareholders can take confidence from the fact that EBIT margins are up from -2.0% to 8.1%, and revenue is growing. Both of which are great metrics to check off for potential growth.

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.

Since Ark Restaurants is no giant, with a market capitalisation of US$76m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Ark Restaurants 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, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news is that Ark Restaurants insiders spent a whopping US$1.2m on stock in just one year, without so much as a single sale. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the company insider, Thomas Satterfield, who made the biggest single acquisition, paying US$600k for shares at about US$19.29 each.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Ark Restaurants will reveal that insiders own a significant piece of the pie. In fact, they own 43% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have US$32m invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Does Ark Restaurants Deserve A Spot On Your Watchlist?

Ark Restaurants' earnings per share growth have been climbing higher at an appreciable rate. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Ark Restaurants belongs near the top of your watchlist. Still, you should learn about the 3 warning signs we've spotted with Ark Restaurants.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Ark Restaurants, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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