Australia markets open in 24 minutes
  • ALL ORDS

    6,762.40
    +71.00 (+1.06%)
     
  • AUD/USD

    0.6954
    +0.0003 (+0.04%)
     
  • ASX 200

    6,578.70
    +50.30 (+0.77%)
     
  • OIL

    106.56
    -1.06 (-0.98%)
     
  • GOLD

    1,833.30
    +3.00 (+0.16%)
     
  • BTC-AUD

    30,412.18
    -646.94 (-2.08%)
     
  • CMC Crypto 200

    462.12
    +8.22 (+1.81%)
     

With EPS Growth And More, Resimac Group (ASX:RMC) Is Interesting

  • Oops!
    Something went wrong.
    Please try again later.
·3-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

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 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 Resimac Group (ASX:RMC). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Resimac Group

Resimac Group's Improving Profits

In the last three years Resimac Group's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. 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, Resimac Group's EPS shot from AU$0.14 to AU$0.26, over the last year. You don't see 91% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.

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. I note that Resimac Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Resimac Group's EBIT margins were flat over the last year, revenue grew by a solid 44% to AU$258m. That's progress.

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

earnings-and-revenue-history
earnings-and-revenue-history

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Resimac Group's forecast profits?

Are Resimac Group Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Resimac Group shares worth a considerable sum. Indeed, they hold AU$60m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 8.0% of the company; visible skin in the game.

Should You Add Resimac Group To Your Watchlist?

Resimac Group's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Resimac Group for a spot on your watchlist. Still, you should learn about the 1 warning sign we've spotted with Resimac Group .

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting