Should You Be Adding Geojit Financial Services (NSE:GEOJITFSL) To Your Watchlist Today?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. 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.

In contrast to all that, I prefer to spend time on companies like Geojit Financial Services (NSE:GEOJITFSL), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.

See our latest analysis for Geojit Financial Services

Geojit Financial Services's Improving Profits

In the last three years Geojit Financial Services's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Geojit Financial Services boosted its trailing twelve month EPS from ₹5.17 to ₹6.30, in the last year. That's a 22% gain; respectable growth in the broader scheme of things.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. I note that Geojit Financial Services's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Geojit Financial Services maintained stable EBIT margins over the last year, all while growing revenue 17% to ₹5.0b. That's a real positive.

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.

Geojit Financial Services isn't a huge company, given its market capitalization of ₹14b. That makes it extra important to check on its balance sheet strength.

Are Geojit Financial Services Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that Geojit Financial Services insiders own a meaningful share of the business. Actually, with 37% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. With that sort of holding, insiders have about ₹5.3b riding on the stock, at current prices. That's nothing to sneeze at!

Should You Add Geojit Financial Services To Your Watchlist?

One important encouraging feature of Geojit Financial Services is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Geojit Financial Services , and understanding these should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.