Here's Why We Think Renew Holdings (LON:RNWH) Is Well Worth Watching

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. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Renew Holdings (LON:RNWH). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

View our latest analysis for Renew Holdings

Renew Holdings's Earnings Per Share Are 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. Over the last three years, Renew Holdings has grown EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.

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. While we note Renew Holdings's EBIT margins were flat over the last year, revenue grew by a solid 3.4% to UK£620m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Renew Holdings's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Renew Holdings 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Renew Holdings insiders refrain from selling stock during the year, but they also spent UK£64k buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. It is also worth noting that it was Independent Non-Executive Director Shatish Dasani who made the biggest single purchase, worth UK£44k, paying UK£4.44 per share.

Does Renew Holdings Deserve A Spot On Your Watchlist?

As I already mentioned, Renew Holdings is a growing business, which is what I like to see. While some companies are struggling to grow EPS, Renew Holdings seems free from that morose affliction. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. Before you take the next step you should know about the 1 warning sign for Renew Holdings that we have uncovered.

The good news is that Renew Holdings 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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