Stock Analysis

Should You Be Adding Rimon Consulting & Management Services (TLV:RMON) To Your Watchlist Today?

TASE:RMON
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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. 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 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 Rimon Consulting & Management Services (TLV:RMON), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Rimon Consulting & Management Services

Rimon Consulting & Management Services' Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's easy to see why many investors focus in on EPS growth. In impressive fashion, Rimon Consulting & Management Services' EPS grew from ₪0.72 to ₪1.63, over the previous 12 months. It's not often a company can achieve year-on-year growth of 125%. That could be a sign that the business has reached a true inflection point.

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. Rimon Consulting & Management Services shareholders can take confidence from the fact that EBIT margins are up from 8.8% to 12%, and revenue is growing. 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. For finer detail, click on the image.

earnings-and-revenue-history
TASE:RMON Earnings and Revenue History November 5th 2023

Since Rimon Consulting & Management Services is no giant, with a market capitalisation of ₪924m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Rimon Consulting & Management Services 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 Rimon Consulting & Management Services shares worth a considerable sum. To be specific, they have ₪175m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 19% of the company, demonstrating a degree of high-level alignment with shareholders.

Is Rimon Consulting & Management Services Worth Keeping An Eye On?

Rimon Consulting & Management Services' earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Rimon Consulting & Management Services very closely. We should say that we've discovered 1 warning sign for Rimon Consulting & Management Services that you should be aware of before investing here.

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 free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether Rimon Consulting & Management Services is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.