Is Now The Time To Put Rolex Rings (NSE:ROLEXRINGS) On Your Watchlist?

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Rolex Rings (NSE:ROLEXRINGS), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Rolex Rings with the means to add long-term value to shareholders.

Check out our latest analysis for Rolex Rings

How Quickly Is Rolex Rings Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Recognition must be given to the that Rolex Rings has grown EPS by 46% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Rolex Rings maintained stable EBIT margins over the last year, all while growing revenue 25% to ₹12b. That's encouraging news for the company!

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

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Rolex Rings' balance sheet strength, before getting too excited.

Are Rolex Rings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news for Rolex Rings shareholders is that no insiders reported selling shares in the last year. Add in the fact that Harshi Mehta, the company insider of the company, paid ₹4.0m for shares at around ₹1,985 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Rolex Rings insiders own more than a third of the company. Indeed, with a collective holding of 58%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. At the current share price, that insider holding is worth a staggering ₹32b. That level of investment from insiders is nothing to sneeze at.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Rolex Rings' CEO, Manesh Madeka, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between ₹33b and ₹132b, like Rolex Rings, the median CEO pay is around ₹34m.

The Rolex Rings CEO received total compensation of just ₹9.6m in the year to March 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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 Rolex Rings To Your Watchlist?

Rolex Rings' earnings have taken off in quite an impressive fashion. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Rolex Rings belongs near the top of your watchlist. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Rolex Rings is trading on a high P/E or a low P/E, relative to its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Rolex Rings, 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.