If EPS Growth Is Important To You, Redde Northgate (LON:REDD) Presents An Opportunity

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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Redde Northgate (LON:REDD), 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.

Check out our latest analysis for Redde Northgate

How Fast Is Redde Northgate Growing Its Earnings Per Share?

Over the last three years, Redde Northgate 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. Redde Northgate's EPS shot up from UK£0.41 to UK£0.62; a result that's bound to keep shareholders happy. That's a impressive gain of 49%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Our analysis has highlighted that Redde Northgate's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. The good news is that Redde Northgate is growing revenues, and EBIT margins improved by 2.7 percentage points to 14%, over the last year. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Redde Northgate's forecast profits?

Are Redde Northgate Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Redde Northgate insiders refrain from selling stock during the year, but they also spent UK£69k buying it. That's nice to see, because it suggests insiders are optimistic.

Along with the insider buying, another encouraging sign for Redde Northgate is that insiders, as a group, have a considerable shareholding. Indeed, they hold UK£24m worth of its stock. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 3.2%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Should You Add Redde Northgate To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Redde Northgate's strong EPS growth. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. Still, you should learn about the 3 warning signs we've spotted with Redde Northgate (including 2 which can't be ignored).

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Redde Northgate, you'll probably love this free list of growing companies that insiders are buying.

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.