Here's Why I Think Riverstone Holdings (SGX:AP4) Is An Interesting Stock

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Riverstone Holdings (SGX:AP4). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.

View our latest analysis for Riverstone Holdings

How Fast Is Riverstone Holdings Growing Its Earnings Per Share?

In the last three years Riverstone Holdings's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Riverstone Holdings's EPS shot from RM0.44 to RM0.96, over the last year. Year on year growth of 119% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that Riverstone Holdings is growing revenues, and EBIT margins improved by 14.3 percentage points to 60%, over the last year. That's great to see, on both counts.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Riverstone Holdings's forecast profits?

Are Riverstone Holdings Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

One shining light for Riverstone Holdings is the serious outlay one insider has made to buy shares, in the last year. Specifically, in one large transaction Co-Founder Teek Son Wong paid S$423k, for stock at S$0.71 per share. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.

On top of the insider buying, we can also see that Riverstone Holdings insiders own a large chunk of the company. In fact, they own 65% 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. At the current share price, that insider holding is worth a whopping RM799m. That means they have plenty of their own capital riding on the performance of the business!

Does Riverstone Holdings Deserve A Spot On Your Watchlist?

Riverstone Holdings's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The cherry on top is that insiders own a bunch of shares, and one has been buying more. Because of the potential that it has reached an inflection point, I'd suggest Riverstone Holdings belongs on the top of your watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for Riverstone Holdings (1 is a bit unpleasant!) that you need to be mindful of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.