Does Rolls-Royce Holdings (LON:RR.) Deserve A Spot On Your Watchlist?

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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Rolls-Royce Holdings (LON:RR.), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is Rolls-Royce Holdings Growing Its Earnings Per Share?

Over the last three years, Rolls-Royce Holdings has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Rolls-Royce Holdings has grown its trailing twelve month EPS from UK£0.29 to UK£0.30, in the last year. That's a modest gain of 4.7%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Rolls-Royce Holdings achieved similar EBIT margins to last year, revenue grew by a solid 15% to UK£19b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

See our latest analysis for Rolls-Royce Holdings

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Rolls-Royce Holdings' forecast profits?

Are Rolls-Royce Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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 Rolls-Royce Holdings insiders refrain from selling stock during the year, but they also spent UK£103k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. It is also worth noting that it was Independent Non-Executive Director Wendy Mars who made the biggest single purchase, worth UK£50k, paying UK£4.96 per share.

The good news, alongside the insider buying, for Rolls-Royce Holdings bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at UK£20m. This considerable investment should help drive long-term value in the business. Even though that's only about 0.02% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, M. Erginbilgic, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Rolls-Royce Holdings, with market caps over UK£5.9b, is around UK£4.9m.

The Rolls-Royce Holdings CEO received UK£4.1m in compensation for the year ending December 2024. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Rolls-Royce Holdings To Your Watchlist?

One positive for Rolls-Royce Holdings is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. You still need to take note of risks, for example - Rolls-Royce Holdings has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Rolls-Royce Holdings, you'll probably love this curated collection of companies in GB that have an attractive valuation alongside 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. 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.