Here's Why We Think REN - Redes Energéticas Nacionais SGPS (ELI:RENE) Is Well Worth Watching

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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like REN - Redes Energéticas Nacionais SGPS (ELI:RENE). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide REN - Redes Energéticas Nacionais SGPS with the means to add long-term value to shareholders.

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How Fast Is REN - Redes Energéticas Nacionais SGPS Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that REN - Redes Energéticas Nacionais SGPS' EPS has grown 18% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. On the revenue front, REN - Redes Energéticas Nacionais SGPS has done well over the past year, growing revenue by 7.1% to €1.0b but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

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 REN - Redes Energéticas Nacionais SGPS

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for REN - Redes Energéticas Nacionais SGPS' future profits.

Are REN - Redes Energéticas Nacionais SGPS Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. For companies with market capitalisations between €855m and €2.7b, like REN - Redes Energéticas Nacionais SGPS, the median CEO pay is around €1.0m.

The REN - Redes Energéticas Nacionais SGPS CEO received €848k in compensation for the year ending December 2024. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Is REN - Redes Energéticas Nacionais SGPS Worth Keeping An Eye On?

For growth investors, REN - Redes Energéticas Nacionais SGPS' raw rate of earnings growth is a beacon in the night. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. We think that based on its merits alone, this stock is worth watching into the future. We don't want to rain on the parade too much, but we did also find 3 warning signs for REN - Redes Energéticas Nacionais SGPS (1 can't be ignored!) that you need to be mindful of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Portuguese companies which have demonstrated growth backed by significant insider holdings.

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.