Here's Why Beardsell (NSE:BEARDSELL) Has Caught The Eye Of Investors

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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.

In contrast to all that, many investors prefer to focus on companies like Beardsell (NSE:BEARDSELL), which has not only revenues, but also profits. 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.

View our latest analysis for Beardsell

Beardsell's Improving Profits

Over the last three years, Beardsell has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Beardsell's EPS grew from ₹1.38 to ₹2.90, over the previous 12 months. Year on year growth of 111% is certainly a sight to behold.

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. Beardsell shareholders can take confidence from the fact that EBIT margins are up from 4.2% to 6.5%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Beardsell isn't a huge company, given its market capitalisation of ₹2.0b. That makes it extra important to check on its balance sheet strength.

Are Beardsell 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the bigger deal is that the Whole-time Director, Jayasree Anumolu, paid ₹8.9m to buy shares at an average price of ₹23.85. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Beardsell insiders own more than a third of the company. Owning 44% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Of course, Beardsell is a very small company, with a market cap of only ₹2.0b. That means insiders only have ₹893m worth of shares, despite the large proportional holding. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Should You Add Beardsell To Your Watchlist?

Beardsell's earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Beardsell belongs near the top of your watchlist. You still need to take note of risks, for example - Beardsell has 2 warning signs we think you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Beardsell, you'll probably love this curated collection of companies in IN that have witnessed growth alongside insider buying in the last three months.

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.