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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in RPM International (NYSE:RPM). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

RPM International's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes.  That means EPS growth is considered a real positive by most successful long-term investors.   RPM International managed to grow EPS by 7.0% per year, over three years.   While that sort of growth rate isn't anything to write home about, it does show the business is growing.  

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth.    It was a year of stability for RPM International as both revenue and EBIT margins remained have been flat over the past year.  That's not a major concern but nor does it point to the long term growth we like to see.  

In the chart below, you can see how the company has grown earnings and revenue, over time.  For finer detail, click on the image.

NYSE:RPM Earnings and Revenue History April 6th 2024

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for RPM International's future EPS 100% free.  

Are RPM International Insiders Aligned With All Shareholders?

Owing to the size of RPM International, we wouldn't expect insiders to hold a significant proportion of the company.  But we do take comfort from the fact that they are investors in the company.     Indeed, they have a considerable amount of wealth invested in it, currently valued at US$176m.   This suggests that leadership will be very mindful of shareholders' interests when making decisions!  

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest.  A brief analysis of the CEO compensation suggests they are.    Our analysis has discovered that the median total compensation for the CEOs of companies like RPM International, with market caps over US$8.0b, is about US$13m.  

The RPM International CEO received US$6.4m in compensation for the year ending May 2023.  That seems pretty reasonable, especially given it's below the median for similar sized companies.   While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind.  It can also be a sign of a culture of integrity, in a broader sense.

Should You Add RPM International To Your Watchlist?

As previously touched on, RPM International is a growing business, which is encouraging.   The growth of EPS may be the eye-catching headline for RPM International, but there's more to bring joy for shareholders.  Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least.     We don't want to rain on the parade too much, but we did also find 2 warning signs for RPM International that you need to be mindful of.  

Although RPM International certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of  companies that not only boast of strong growth but have also seen recent insider buying..

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.