For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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 RPMGlobal Holdings (ASX:RUL). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for RPMGlobal Holdings

RPMGlobal Holdings' Improving Profits

RPMGlobal Holdings 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. As a result, we'll zoom in on growth over the last year, instead. Impressively, RPMGlobal Holdings' EPS catapulted from AU$0.016 to AU$0.039, over the last year. It's a rarity to see 144% year-on-year growth like that.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note RPMGlobal Holdings achieved similar EBIT margins to last year, revenue grew by a solid 11% to AU$100m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check RPMGlobal Holdings' balance sheet strength, before getting too excited.

Are RPMGlobal Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling RPMGlobal Holdings shares, in the last year. So it's definitely nice that Independent Non-Executive Director Paul Scurrah bought AU$25k worth of shares at an average price of around AU$2.90. It seems that at least one insider is prepared to show the market there is potential within RPMGlobal Holdings.

On top of the insider buying, it's good to see that RPMGlobal Holdings insiders have a valuable investment in the business. As a matter of fact, their holding is valued at AU$69m. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 10% of the shares on issue for the business, an appreciable amount considering the market cap.

Is RPMGlobal Holdings Worth Keeping An Eye On?

RPMGlobal Holdings' earnings per share have been soaring, with growth rates sky high. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest RPMGlobal Holdings belongs near the top of your watchlist. Of course, profit growth is one thing but it's even better if RPMGlobal Holdings is receiving high returns on equity, since that should imply it can keep growing without much need for capital. Click on this link to see how it is faring against the average in its industry.

Keen growth investors love to see insider activity. Thankfully, RPMGlobal Holdings isn't the only one. You can see a a curated list of Australian companies which have exhibited consistent growth accompanied by high insider ownership.

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.