Here's Why We Think Byotrol (LON:BYOT) Is Well Worth Watching

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In contrast to all that, I prefer to spend time on companies like Byotrol (LON:BYOT), which has not only revenues, but also profits. 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.

View our latest analysis for Byotrol

How Fast Is Byotrol Growing Its Earnings Per Share?

Over the last three years, Byotrol has grown earnings per share (EPS) like young 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. Like a firecracker arcing through the night sky, Byotrol's EPS shot from UK£0.0016 to UK£0.0045, over the last year. You don't see 184% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Byotrol shareholders can take confidence from the fact that EBIT margins are up from 8.9% to 12%, and revenue is growing. That's great to see, on both counts.

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

Since Byotrol is no giant, with a market capitalization of UK£30m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Byotrol Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Not only did Byotrol insiders refrain from selling stock during the year, but they also spent UK£37k buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. Zooming in, we can see that the biggest insider purchase was by Non-Executive Chairman John Langlands for UK£18k worth of shares, at about UK£0.018 per share.

It's reassuring that Byotrol insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalizations under UK£147m, like Byotrol, the median CEO pay is around UK£249k.

The Byotrol CEO received UK£135k in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, 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.

Is Byotrol Worth Keeping An Eye On?

Byotrol's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Better yet, we can observe insider buying and the chief executive pay looks reasonable. The strong EPS growth suggests Byotrol may be at an inflection point. If so, then it the potential for further gains probably merit a spot on your watchlist. Even so, be aware that Byotrol is showing 3 warning signs in our investment analysis , and 1 of those is concerning...

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Byotrol, you'll probably love this free list of growing companies that insiders are 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. 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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