Here's Why I Think RediShred Capital (CVE:KUT) Might Deserve Your Attention Today

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like RediShred Capital (CVE:KUT). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for RediShred Capital

RediShred Capital's Improving Profits

In the last three years RediShred Capital's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. RediShred Capital has grown its trailing twelve month EPS from CA$0.025 to CA$0.027, in the last year. That's a modest gain of 7.2%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While RediShred Capital did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future RediShred Capital EPS 100% free.

Are RediShred Capital Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We note that RediShred Capital insiders spent CA$129k on stock, over the last year; in contrast, we didn't see any selling. That puts the company in a nice light, as it makes me think its leaders are feeling confident. We also note that it was the Independent Director, Phillip Gaunce, who made the biggest single acquisition, paying CA$60k for shares at about CA$0.39 each.

Along with the insider buying, another encouraging sign for RediShred Capital is that insiders, as a group, have a considerable shareholding. Indeed, they hold CA$19m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 34% of the company, demonstrating a degree of high-level alignment with shareholders.

Is RediShred Capital Worth Keeping An Eye On?

One important encouraging feature of RediShred Capital is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. However, before you get too excited we've discovered 4 warning signs for RediShred Capital (2 are a bit unpleasant!) that you should be aware of.

The good news is that RediShred Capital 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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