Here's Why We Think Top Ramdor Systems & Computers (1990) (TLV:TOPS) Is Well Worth Watching

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 Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Top Ramdor Systems & Computers (1990) (TLV:TOPS). 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.

Check out our latest analysis for Top Ramdor Systems & Computers (1990)

How Fast Is Top Ramdor Systems & Computers (1990) Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. Top Ramdor Systems & Computers (1990) managed to grow EPS by 14% per year, over three years. That's a pretty good rate, if the company can sustain it.

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. Top Ramdor Systems & Computers (1990)'s EBIT margins have actually improved by 2.5 percentage points in the last year, to reach 8.5%, but, on the flip side, revenue was down 3.2%. That falls short of ideal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Top Ramdor Systems & Computers (1990) isn't a huge company, given its market capitalization of ₪94m. That makes it extra important to check on its balance sheet strength.

Are Top Ramdor Systems & Computers (1990) Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Top Ramdor Systems & Computers (1990) insiders own a significant number of shares certainly appeals to me. In fact, they own 55% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about ₪52m riding on the stock, at current prices. That's nothing to sneeze at!

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 Top Ramdor Systems & Computers (1990) with market caps under ₪644m is about ₪1.4m.

The Top Ramdor Systems & Computers (1990) CEO received ₪1.1m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Top Ramdor Systems & Computers (1990) To Your Watchlist?

One positive for Top Ramdor Systems & Computers (1990) is that it is growing EPS. That's nice to see. Earnings growth might be the main game for Top Ramdor Systems & Computers (1990), 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. You still need to take note of risks, for example - Top Ramdor Systems & Computers (1990) has 4 warning signs we think you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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.

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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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