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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like RE&S Holdings (Catalist:1G1). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide RE&S Holdings with the means to add long-term value to shareholders.

View our latest analysis for RE&S Holdings

How Fast Is RE&S Holdings Growing Its Earnings Per Share?

Over the last three years, RE&S Holdings has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, RE&S Holdings' EPS catapulted from S$0.015 to S$0.033, over the last year. Year on year growth of 114% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that RE&S Holdings is growing revenues, and EBIT margins improved by 7.7 percentage points to 10%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

RE&S Holdings isn't a huge company, given its market capitalisation of S$103m. That makes it extra important to check on its balance sheet strength.

Are RE&S Holdings Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that RE&S Holdings insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 89% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have S$91m invested in the business, at the current share price. That's nothing to sneeze at!

Should You Add RE&S Holdings To Your Watchlist?

RE&S Holdings' earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, RE&S Holdings is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. However, before you get too excited we've discovered 2 warning signs for RE&S Holdings that you should be aware of.

Although RE&S Holdings certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here