Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in RELX (LON:REL). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
RELX's Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, RELX has grown EPS by 12% per year. That's a pretty good rate, if the company can sustain it.
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. While we note RELX's EBIT margins were flat over the last year, revenue grew by a solid 5.1% to UK£7.9b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
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 RELX.
Are RELX Insiders Aligned With All Shareholders?
Since RELX has a market capitalization of UK£33b, 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. To be specific, they have UK£32m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add RELX To Your Watchlist?
One important encouraging feature of RELX is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for RELX that you need to be mindful of.
Although RELX certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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