Is Now The Time To Put Reject Shop (ASX:TRS) On Your Watchlist?
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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Reject Shop (ASX:TRS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Reject Shop with the means to add long-term value to shareholders.
Check out our latest analysis for Reject Shop
How Fast Is Reject Shop Growing Its Earnings Per Share?
Reject Shop has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, Reject Shop's EPS soared from AU$0.17 to AU$0.23, over the last year. That's a impressive gain of 35%.
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. EBIT margins for Reject Shop remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 4.4% to AU$803m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Reject Shop?
Are Reject Shop 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
It's good to see Reject Shop insiders walking the walk, by spending AU$324k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. It is also worth noting that it was Independent Non-Executive Chairman Steven Fisher who made the biggest single purchase, worth AU$156k, paying AU$4.45 per share.
Does Reject Shop Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Reject Shop's strong EPS growth. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. In essence, your time will not be wasted checking out Reject Shop in more detail. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of Reject Shop. You might benefit from giving it a glance today.
Keen growth investors love to see insider buying. Thankfully, Reject Shop isn't the only one. You can see a a free list of them here.
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.
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