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

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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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Resimac Group (ASX:RMC). 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. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

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Check out our latest analysis for Resimac Group

How Fast Is Resimac Group Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. I, for one, am blown away by the fact that Resimac Group has grown EPS by 54% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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. 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. Resimac Group maintained stable EBIT margins over the last year, all while growing revenue 14% to AU$158m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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

Since Resimac Group is no giant, with a market capitalization of AU$416m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Resimac Group Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Resimac Group shares, in the last year. With that in mind, it's heartening that Susan Wood-Hansen, the Independent Non-Executive Director of the company, paid AU$49k for shares at around AU$0.54 each.

On top of the insider buying, it's good to see that Resimac Group insiders have a valuable investment in the business. Indeed, they hold AU$40m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 9.5% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Resimac Group Deserve A Spot On Your Watchlist?

Resimac Group's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The cherry on top is that insiders own a bunch of shares, and one has been buying more. Because of the potential that it has reached an inflection point, I'd suggest Resimac Group belongs on the top of your watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Resimac Group (of which 1 doesn't sit too well with us!) you should know about.

The good news is that Resimac Group 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.

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. 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.

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