Here's Why We Think Reliance Worldwide (ASX:RWC) Might Deserve Your Attention Today

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Reliance Worldwide (ASX:RWC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Reliance Worldwide with the means to add long-term value to shareholders.

Check out our latest analysis for Reliance Worldwide

Reliance Worldwide's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Reliance Worldwide's EPS has grown 22% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Reliance Worldwide shareholders can take confidence from the fact that EBIT margins are up from 17% to 20%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Reliance Worldwide's future profits.

Are Reliance Worldwide Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

In the last year insider at Reliance Worldwide were both selling and buying shares; but happily, as a group they spent US$95k more on stock, than they netted from selling it. Although some people may hesitate due to the share sales, the fact that insiders bought more than they sold, is a positive thing to note. It is also worth noting that it was Independent Non-Executive Director Sharon McCrohan who made the biggest single purchase, worth AU$114k, paying AU$3.81 per share.

Does Reliance Worldwide Deserve A Spot On Your Watchlist?

You can't deny that Reliance Worldwide has grown its earnings per share at a very impressive rate. That's attractive. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. So on this analysis, Reliance Worldwide is probably worth spending some time on. We don't want to rain on the parade too much, but we did also find 2 warning signs for Reliance Worldwide that you need to be mindful of.

Keen growth investors love to see insider buying. Thankfully, Reliance Worldwide isn't the only one. You can see a a free list of them here.

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.