Does BLS E-Services (NSE:BLSE) Deserve A Spot On Your Watchlist?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 BLS E-Services (NSE:BLSE). 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.

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BLS E-Services' 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. Recognition must be given to the that BLS E-Services has grown EPS by 47% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. While BLS E-Services did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Check out our latest analysis for BLS E-Services

Since BLS E-Services is no giant, with a market capitalisation of ₹20b, you should definitely check its cash and debt before getting too excited about its prospects.

Are BLS E-Services Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

With strong conviction, BLS E-Services insiders have stood united by refusing to sell shares over the last year. But more importantly, company insider Preeti Dudhediya spent ₹9.7m acquiring shares, doing so at an average price of ₹213. Strong buying like that could be a sign of opportunity.

On top of the insider buying, it's good to see that BLS E-Services insiders have a valuable investment in the business. Indeed, they hold ₹3.6b worth of its stock. This considerable investment should help drive long-term value in the business. That amounts to 18% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add BLS E-Services To Your Watchlist?

BLS E-Services' earnings have taken off in quite an impressive fashion. 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 BLS E-Services belongs near the top of your watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for BLS E-Services that you need to be mindful of.

The good news is that BLS E-Services is not the only stock with insider buying. Here's a list of small cap, undervalued companies in IN with 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.