Does Bombay Super Hybrid Seeds (NSE:BSHSL) 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 completely lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Bombay Super Hybrid Seeds (NSE:BSHSL). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Bombay Super Hybrid Seeds

How Quickly Is Bombay Super Hybrid Seeds Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Bombay Super Hybrid Seeds has grown EPS by 25% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. Bombay Super Hybrid Seeds maintained stable EBIT margins over the last year, all while growing revenue 72% to ₹1.6b. That's progress.

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.

Bombay Super Hybrid Seeds isn't a huge company, given its market capitalization of ₹1.4b. That makes it extra important to check on its balance sheet strength.

Are Bombay Super Hybrid Seeds 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 as you can imagine, the fact that Bombay Super Hybrid Seeds insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 82%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about ₹1.2b riding on the stock, at current prices. That's nothing to sneeze at!

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. I discovered that the median total compensation for the CEOs of companies like Bombay Super Hybrid Seeds with market caps under ₹15b is about ₹3.2m.

The Bombay Super Hybrid Seeds CEO received total compensation of only ₹1.7m in the year to . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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. It can also be a sign of good governance, more generally.

Should You Add Bombay Super Hybrid Seeds To Your Watchlist?

For growth investors like me, Bombay Super Hybrid Seeds's raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the takeaway for me is that Bombay Super Hybrid Seeds is worth keeping an eye on. Even so, be aware that Bombay Super Hybrid Seeds is showing 2 warning signs in our investment analysis , you should know about...

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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This article by Simply Wall St is general in nature. 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.
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