Yahoo Finance Here's Why We Think Rambus (NASDAQ:RMBS) Is Well Worth Watching
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. 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 Rambus (NASDAQ:RMBS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Rambus with the means to add long-term value to shareholders.
See our latest analysis for Rambus
Rambus' Improving Profits
In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. Which is why EPS growth is looked upon so favourably. It is awe-striking that Rambus' EPS went from US$0.51 to US$3.37 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While revenue is looking a bit flat, the good news is EBIT margins improved by 7.2 percentage points to 24%, in the last twelve months. That's something to smile about.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Rambus' forecast profits?
Are Rambus Insiders Aligned With All Shareholders?
Owing to the size of Rambus, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at US$33m. That's a lot of money, and no small incentive to work hard. Despite being just 0.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Does Rambus Deserve A Spot On Your Watchlist?
Rambus' earnings per share growth have been climbing higher at an appreciable rate. 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 based on this quick analysis, we do think it's worth considering Rambus for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 3 warning signs for Rambus you should be aware of, and 2 of them are significant.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.
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.
