Should You Be Adding SIS (NSE:SIS) To Your Watchlist Today?

By
Simply Wall St
Published
March 15, 2022
NSEI:SIS
Source: Shutterstock

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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in SIS (NSE:SIS). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for SIS

How Fast Is SIS Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that SIS has managed to grow EPS by 23% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. While we note SIS's EBIT margins were flat over the last year, revenue grew by a solid 11% to ₹99b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NSEI:SIS Earnings and Revenue History March 15th 2022

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for SIS.

Are SIS 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 SIS insiders own a meaningful share of the business. In fact, they own 74% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. At the current share price, that insider holding is worth a whopping ₹51b. That means they have plenty of their own capital riding on the performance of the business!

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between ₹31b and ₹123b, like SIS, the median CEO pay is around ₹25m.

The CEO of SIS only received ₹9.7m in total compensation for the year ending . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Does SIS Deserve A Spot On Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about SIS's strong EPS growth. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Each to their own, but I think all this makes SIS look rather interesting indeed. Before you take the next step you should know about the 1 warning sign for SIS that we have uncovered.

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.

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