For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and 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 Rubis (EPA:RUI). While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
How Fast Is Rubis Growing?
As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Rubis managed to grow EPS by 8.7% per year, over three years. That’s a pretty good rate, if the company can sustain it.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company’s growth. Rubis maintained stable EBIT margins over the last year, all while growing revenue 12% to €5.1b. That’s a real positive.
The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Fortunately, we’ve got access to analyst forecasts of Rubis’s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Rubis Insiders Aligned With All Shareholders?
Since Rubis has a market capitalization of €5.5b, we wouldn’t expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Indeed, they hold €14m worth of its stock. That’s a lot of money, and no small incentive to work hard. Despite being just 0.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Does Rubis Deserve A Spot On Your Watchlist?
One positive for Rubis is that it is growing EPS. That’s nice to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I’d consider keeping the company on a watchlist. Now, you could try to make up your mind on Rubis by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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