With EPS Growth And More, Salona Cotspin (NSE:SALONA) Is Interesting

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like Salona Cotspin (NSE:SALONA). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Salona Cotspin

Salona Cotspin's Improving Profits

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Salona Cotspin's EPS went from ₹7.68 to ₹39.14 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

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. Salona Cotspin maintained stable EBIT margins over the last year, all while growing revenue 200% to ₹5.6b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Since Salona Cotspin is no giant, with a market capitalization of ₹1.1b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Salona Cotspin 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 Salona Cotspin insiders own a meaningful share of the business. Indeed, with a collective holding of 71%, 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. Valued at only ₹1.1b Salona Cotspin is really small for a listed company. So despite a large proportional holding, insiders only have ₹814m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Should You Add Salona Cotspin To Your Watchlist?

Salona Cotspin'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 Salona Cotspin is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. However, before you get too excited we've discovered 4 warning signs for Salona Cotspin (1 is significant!) that you should be aware of.

You can invest in 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.