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. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Banka BioLoo (NSE:BANKA). 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.
How Fast Is Banka BioLoo Growing Its Earnings Per Share?
Over the last three years, Banka BioLoo 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 the last firework on New Year’s Eve accelerating into the sky, Banka BioLoo’s EPS shot from ₹6.05 to ₹10.96, over the last year. You don’t see 81% year-on-year growth like that, very often.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). On the one hand, Banka BioLoo’s EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future my hold further growth, especially if EBIT margins can stabilize.
Since Banka BioLoo is no giant, with a market capitalization of ₹366m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Banka BioLoo 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 Banka BioLoo insiders own a meaningful share of the business. Indeed, with a collective holding of 86%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, Banka BioLoo is a very small company, with a market cap of only ₹366m. That means insiders only have ₹315m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!
Does Banka BioLoo Deserve A Spot On Your Watchlist?
Banka BioLoo’s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Banka BioLoo is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Of course, just because Banka BioLoo is growing does not mean it is undervalued. If you’re wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
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 firstname.lastname@example.org. 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.