Yahoo Finance Here's Why We Think Renew Holdings (LON:RNWH) Is Well Worth Watching
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Renew Holdings (LON:RNWH). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.
See our latest analysis for Renew Holdings
How Quickly Is Renew Holdings Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Renew Holdings grew its EPS by 7.9% per year. While that sort of growth rate isn't amazing, it does show the business is growing.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note Renew Holdings's EBIT margins were flat over the last year, revenue grew by a solid 11% to UK£600m. 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.
Fortunately, we've got access to analyst forecasts of Renew Holdings's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Renew Holdings Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Not only did Renew Holdings insiders refrain from selling stock during the year, but they also spent UK£50k buying it. That's nice to see, because it suggests insiders are optimistic.
Should You Add Renew Holdings To Your Watchlist?
As I already mentioned, Renew Holdings is a growing business, which is what I like to see. While some companies are struggling to grow EPS, Renew Holdings seems free from that morose affliction. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. If you think Renew Holdings might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.
The good news is that Renew Holdings is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
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 editorial-team@simplywallst.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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
