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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like Onity Group (NYSE:ONIT). While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.

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In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that Onity Group grew its EPS from US$4.27 to US$21.74, in one short year. While it’s difficult to sustain growth at that level, it bodes well for the company’s outlook for the future.

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. It’s noted that Onity Group’s revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Onity Group achieved similar EBIT margins to last year, revenue grew by a solid 9.3% to US$1.1b. That’s encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

View our latest analysis for Onity Group

While it’s always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Onity Group’s balance sheet strength, before getting too excited.

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. Onity Group followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Given insiders own a significant chunk of shares, currently valued at US$54m, they have plenty of motivation to push the business to succeed. At 14% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.