Rolls-Royce Holdings (LON:RR.) Ticks All The Boxes When It Comes To Earnings Growth

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 currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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. As a result, we'll zoom in on growth over the last year, 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 4.2%.

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. To see the actual numbers, click on the chart.

See our latest analysis for Rolls-Royce Holdings

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

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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Shareholders in Rolls-Royce Holdings will be more than happy to see insiders committing themselves to the company, spending UK£168k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. We also note that it was the Independent Non-Executive Director, Wendy Mars, who made the biggest single acquisition, paying UK£50k for shares at about UK£4.96 each.

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£15m. That shows significant buy-in, and may indicate conviction in the business strategy. 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 are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because on our analysis the CEO, M. Erginbilgic, is paid less than the median for similar sized companies. For companies with market capitalisations over UK£6.2b, like Rolls-Royce Holdings, the median CEO pay is around UK£5.1m.

Rolls-Royce Holdings offered total compensation worth UK£4.1m to its CEO in the year to December 2024. That comes in below the average for similar sized companies and seems pretty reasonable. 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?

As previously touched on, Rolls-Royce Holdings is a growing business, which is encouraging. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. However, before you get too excited we've discovered 2 warning signs for Rolls-Royce Holdings (1 is a bit concerning!) that you should be aware of.

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.