Should You Be Adding Ritco Logistics (NSE:RITCO) To Your Watchlist Today?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Ritco Logistics (NSE:RITCO). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ritco Logistics with the means to add long-term value to shareholders.

View our latest analysis for Ritco Logistics

Ritco Logistics' Earnings Per Share Are 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, Ritco Logistics has achieved impressive annual EPS growth of 40%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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 we note Ritco Logistics achieved similar EBIT margins to last year, revenue grew by a solid 27% to ₹7.5b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Ritco Logistics isn't a huge company, given its market capitalisation of ₹4.6b. That makes it extra important to check on its balance sheet strength.

Are Ritco Logistics Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The good news for Ritco Logistics shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Gautam Mukherjee, the Chief Financial Officer of the company, paid ₹1.0m for shares at around ₹200 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Ritco Logistics.

On top of the insider buying, we can also see that Ritco Logistics insiders own a large chunk of the company. Indeed, with a collective holding of 65%, 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. In terms of absolute value, insiders have ₹3.0b invested in the business, at the current share price. So there's plenty there to keep them focused!

Should You Add Ritco Logistics To Your Watchlist?

Ritco Logistics' earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Ritco Logistics belongs near the top of your watchlist. It is worth noting though that we have found 2 warning signs for Ritco Logistics (1 is a bit unpleasant!) that you need to take into consideration.

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