Is Now The Time To Put RKEC Projects (NSE:RKEC) On Your Watchlist?

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

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like RKEC Projects (NSE:RKEC). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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How Fast Is RKEC Projects Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. RKEC Projects managed to grow EPS by 17% per year, over three years. That's a pretty good rate, if the company can sustain it.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While RKEC Projects did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Check out our latest analysis for RKEC Projects

Since RKEC Projects is no giant, with a market capitalisation of ₹1.6b, you should definitely check its cash and debt before getting too excited about its prospects.

Are RKEC Projects Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that RKEC Projects insiders own a meaningful share of the business. Indeed, with a collective holding of 67%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Of course, RKEC Projects is a very small company, with a market cap of only ₹1.6b. That means insiders only have ₹1.1b worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Is RKEC Projects Worth Keeping An Eye On?

As previously touched on, RKEC Projects is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. You still need to take note of risks, for example - RKEC Projects has 4 warning signs (and 2 which are concerning) we think you should know about.

Although RKEC Projects certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.