Do RenaissanceRe Holdings' (NYSE:RNR) Earnings Warrant Your Attention?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 RenaissanceRe Holdings (NYSE:RNR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide RenaissanceRe Holdings with the means to add long-term value to shareholders.

See our latest analysis for RenaissanceRe Holdings

How Fast Is RenaissanceRe Holdings Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that RenaissanceRe Holdings' EPS went from US$8.39 to US$49.70 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

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. The music to the ears of RenaissanceRe Holdings shareholders is that EBIT margins have grown from 11% to 32% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

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

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for RenaissanceRe Holdings.

Are RenaissanceRe Holdings Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$13b company like RenaissanceRe Holdings. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth US$264m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Should You Add RenaissanceRe Holdings To Your Watchlist?

RenaissanceRe Holdings' earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching RenaissanceRe Holdings very closely. It is worth noting though that we have found 1 warning sign for RenaissanceRe Holdings that you need to take into consideration.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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.