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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Royal Bank of Canada (TSE:RY). 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.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Royal Bank of Canada's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Royal Bank of Canada boosted its trailing twelve month EPS from CA$10.60 to CA$12.32, in the last year. This amounts to a 16% gain; a figure that shareholders will be pleased to see.

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. Not all of Royal Bank of Canada's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Royal Bank of Canada maintained stable EBIT margins over the last year, all while growing revenue 17% to CA$57b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

See our latest analysis for Royal Bank of Canada

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 Royal Bank of Canada's future EPS 100% free.

Are Royal Bank of Canada Insiders Aligned With All Shareholders?

Since Royal Bank of Canada has a market capitalisation of CA$239b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they hold CA$25m worth of its stock. This considerable investment should help drive long-term value in the business. Despite being just 0.01% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.