If EPS Growth Is Important To You, RIT Capital Partners (LON:RCP) Presents An Opportunity

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like RIT Capital Partners (LON:RCP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide RIT Capital Partners with the means to add long-term value to shareholders.

Check out our latest analysis for RIT Capital Partners

RIT Capital Partners' Improving Profits

Over the last three years, RIT Capital Partners 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. Impressively, RIT Capital Partners' EPS catapulted from UK£3.22 to UK£5.52, over the last year. It's a rarity to see 71% year-on-year growth like that. The best case scenario? That the business has hit a true inflection point.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that RIT Capital Partners' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The music to the ears of RIT Capital Partners shareholders is that EBIT margins have grown from 92% to 94% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check RIT Capital Partners' balance sheet strength, before getting too excited.

Are RIT Capital Partners 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.

The good news for RIT Capital Partners shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Michael Power, the Non-Executive Independent Director of the company, paid UK£10.0k for shares at around UK£27.47 each. It seems that at least one insider is prepared to show the market there is potential within RIT Capital Partners.

On top of the insider buying, it's good to see that RIT Capital Partners insiders have a valuable investment in the business. We note that their impressive stake in the company is worth UK£177m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Does RIT Capital Partners Deserve A Spot On Your Watchlist?

RIT Capital Partners' earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest RIT Capital Partners belongs near the top of your watchlist. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of RIT Capital Partners. You might benefit from giving it a glance today.

The good news is that RIT Capital Partners 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.