Is Now The Time To Put BSL (NSE:BSL) On Your Watchlist?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 BSL (NSE:BSL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide BSL with the means to add long-term value to shareholders.

Check out the opportunities and risks within the IN Luxury industry.

How Fast Is BSL Growing Its Earnings Per Share?

BSL has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. BSL boosted its trailing twelve month EPS from ₹9.48 to ₹11.36, in the last year. This amounts to a 20% gain; a figure that shareholders will be pleased to see.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for BSL remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 28% to ₹4.6b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

BSL isn't a huge company, given its market capitalisation of ₹1.4b. That makes it extra important to check on its balance sheet strength.

Are BSL Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So those who are interested in BSL will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Actually, with 44% of the company to their names, insiders are profoundly invested in the business. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. Although, with BSL being valued at ₹1.4b, this is a small company we're talking about. So despite a large proportional holding, insiders only have ₹632m worth of stock. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Is BSL Worth Keeping An Eye On?

One positive for BSL is that it is growing EPS. That's nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. Before you take the next step you should know about the 4 warning signs for BSL (2 make us uncomfortable!) that we have uncovered.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.