Is Now The Time To Put Ramsdens Holdings (LON:RFX) On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Ramsdens Holdings (LON:RFX). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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How Fast Is Ramsdens Holdings Growing Its Earnings Per Share?

In the last three years Ramsdens Holdings' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. It's good to see that Ramsdens Holdings' EPS has grown from UK£0.25 to UK£0.31 over twelve months. That's a 25% gain; respectable growth in the broader scheme of things.

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. Ramsdens Holdings maintained stable EBIT margins over the last year, all while growing revenue 17% to UK£103m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

View our latest analysis for Ramsdens Holdings

Since Ramsdens Holdings is no giant, with a market capitalisation of UK£117m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Ramsdens Holdings Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Ramsdens Holdings shares worth a considerable sum. Indeed, they hold UK£11m worth of its stock. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 9.1% of the shares on issue for the business, an appreciable amount considering the market cap.

Is Ramsdens Holdings Worth Keeping An Eye On?

One positive for Ramsdens Holdings is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination definitely favoured by investors so consider keeping the company on a watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Ramsdens Holdings you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of British companies which have demonstrated growth backed by significant insider holdings.

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.