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We Ran A Stock Scan For Earnings Growth And Enerplus (TSE:ERF) Passed With Ease

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.

In contrast to all that, many investors prefer to focus on companies like Enerplus (TSE:ERF), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Enerplus

How Fast Is Enerplus Growing Its Earnings Per Share?

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 Enerplus to have grown EPS from US$0.93 to US$4.22 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

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Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Enerplus is growing revenues, and EBIT margins improved by 23.9 percentage points to 50%, over the last year. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
earnings-and-revenue-history

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Enerplus.

Are Enerplus 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. Shareholders will be pleased by the fact that insiders own Enerplus shares worth a considerable sum. As a matter of fact, their holding is valued at US$23m. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Enerplus To Your Watchlist?

Enerplus' earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Enerplus is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. It is worth noting though that we have found 1 warning sign for Enerplus that you need to take into consideration.

Although Enerplus certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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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