Here's Why I Think Rekah Pharmaceutical Industry (TLV:REKA) Is An Interesting Stock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Rekah Pharmaceutical Industry (TLV:REKA). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Rekah Pharmaceutical Industry

Rekah Pharmaceutical Industry's Improving Profits

Over the last three years, Rekah Pharmaceutical Industry has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Rekah Pharmaceutical Industry boosted its trailing twelve month EPS from ₪0.50 to ₪0.60, in the last year. That's a 21% gain; respectable growth in the broader scheme of things.

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. While we note Rekah Pharmaceutical Industry's EBIT margins were flat over the last year, revenue grew by a solid 19% to ₪240m. 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.

Since Rekah Pharmaceutical Industry is no giant, with a market capitalization of ₪308m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Rekah Pharmaceutical Industry Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Rekah Pharmaceutical Industry insiders have a significant amount of capital invested in the stock. Indeed, they hold ₪106m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 35% of the company, demonstrating a degree of high-level alignment with shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Rekah Pharmaceutical Industry with market caps under ₪636m is about ₪1.4m.

The Rekah Pharmaceutical Industry CEO received ₪832k in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does Rekah Pharmaceutical Industry Deserve A Spot On Your Watchlist?

One positive for Rekah Pharmaceutical Industry is that it is growing EPS. That's nice to see. Earnings growth might be the main game for Rekah Pharmaceutical Industry, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Rekah Pharmaceutical Industry (1 is significant) you should be aware of.

Although Rekah Pharmaceutical Industry certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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. 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.
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