Yahoo Finance Do REX American Resources' (NYSE:REX) Earnings Warrant Your Attention?
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like REX American Resources (NYSE:REX). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for REX American Resources
How Fast Is REX American Resources Growing Its Earnings Per Share?
In the last three years REX American Resources' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, REX American Resources' EPS catapulted from US$1.57 to US$3.48, over the last year. Year on year growth of 122% is certainly a sight to behold.
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. We note that while EBIT margins have improved from 3.0% to 8.3%, the company has actually reported a fall in revenue by 2.5%. While not disastrous, these figures could be better.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check REX American Resources' balance sheet strength, before getting too excited.
Are REX American Resources Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that REX American Resources insiders have a significant amount of capital invested in the stock. Indeed, they hold US$48m worth of its stock. This considerable investment should help drive long-term value in the business. Despite being just 4.8% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Does REX American Resources Deserve A Spot On Your Watchlist?
REX American Resources' earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching REX American Resources very closely. We don't want to rain on the parade too much, but we did also find 2 warning signs for REX American Resources that you need to be mindful of.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.
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.
