Yahoo Finance Do RIT Capital Partners's (LON:RCP) Earnings Warrant Your Attention?
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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
So if you're like me, you might be more interested in profitable, growing companies, like RIT Capital Partners (LON:RCP). 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. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
View our latest analysis for RIT Capital Partners
RIT Capital Partners's Improving Profits
Over the last three years, RIT Capital Partners has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, RIT Capital Partners's EPS shot from UK£3.22 to UK£5.52, over the last year. You don't see 71% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of RIT Capital Partners's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. The good news is that RIT Capital Partners is growing revenues, and EBIT margins improved by 2.1 percentage points to 94%, over the last year. That's great to see, on both counts.
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.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are RIT Capital Partners Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.
We haven't seen any insiders selling RIT Capital Partners shares, in the last year. With that in mind, it's heartening that Michael Power, the Non-Executive Independent Director of the company, paid UK£20k for shares at around UK£25.70 each.
Along with the insider buying, another encouraging sign for RIT Capital Partners is that insiders, as a group, have a considerable shareholding. Notably, they have an enormous stake in the company, worth UK£202m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Does RIT Capital Partners Deserve A Spot On Your Watchlist?
RIT Capital Partners's earnings have taken off like any random crypto-currency did, back in 2017. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe RIT Capital Partners deserves timely attention. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of RIT Capital Partners. You might benefit from giving it a glance today.
The good news is that RIT Capital Partners 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.
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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.
