Here's Why I Think Resimac Group (ASX:RMC) Might Deserve Your Attention Today

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Resimac Group (ASX:RMC). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Resimac Group

How Fast Is Resimac Group Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud Resimac Group's stratospheric annual EPS growth of 54%, compound, over the last three years? Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

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. Not all of Resimac Group'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. While we note Resimac Group's EBIT margins were flat over the last year, revenue grew by a solid 14% to AU$158m. That's a real positive.

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.

Resimac Group isn't a huge company, given its market capitalization of AU$424m. That makes it extra important to check on its balance sheet strength.

Are Resimac Group Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.

The good news, alongside the insider buying, for Resimac Group bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold AU$40m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 9.5% of the company; visible skin in the game.

Does Resimac Group Deserve A Spot On Your Watchlist?

Resimac Group's earnings per share have taken off like a rocket aimed right at the moon. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Resimac Group belongs on the top of your watchlist. Still, you should learn about the 2 warning signs we've spotted with Resimac Group (including 1 which shouldn't be ignored) .

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.

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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.
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