Here's Why I Think Regional Express Holdings (ASX:REX) Is An Interesting Stock
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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Regional Express Holdings (ASX:REX). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
Check out our latest analysis for Regional Express Holdings
Regional Express Holdings's Improving Profits
Over the last three years, Regional Express Holdings has grown earnings per share (EPS) like bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Regional Express Holdings boosted its trailing twelve month EPS from AU$0.15 to AU$0.16, in the last year. I doubt many would complain about that 11% gain.
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. Regional Express Holdings maintained stable EBIT margins over the last year, all while growing revenue 7.2% to AU$308m. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Regional Express Holdings isn't a huge company, given its market capitalization of AU$150m. That makes it extra important to check on its balance sheet strength.
Are Regional Express Holdings Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Regional Express Holdings insiders own a meaningful share of the business. In fact, hey own 67% of the company, so they will share in the same delights and challenged experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. That means insiders have AU$100m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!
Should You Add Regional Express Holdings To Your Watchlist?
As I already mentioned, Regional Express Holdings is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. 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 Regional Express Holdings. You might benefit from giving it a glance today.
Although Regional Express Holdings certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
