Does Bigbloc Construction (NSE:BIGBLOC) Deserve A Spot 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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Bigbloc Construction (NSE:BIGBLOC), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Bigbloc Construction with the means to add long-term value to shareholders.

View our latest analysis for Bigbloc Construction

How Fast Is Bigbloc Construction Growing Its Earnings Per Share?

In the last three years Bigbloc Construction's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that Bigbloc Construction's EPS has grown from ₹3.30 to ₹3.93 over twelve months. There's little doubt shareholders would be happy with that 19% gain.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Despite the relatively flat revenue figures, shareholders will be pleased to see EBIT margins have grown from 15% to 22% in the last 12 months. 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.

Since Bigbloc Construction is no giant, with a market capitalisation of ₹12b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Bigbloc Construction Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Bigbloc Construction shares worth a considerable sum. As a matter of fact, their holding is valued at ₹4.1b. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 35% of the company; visible skin in the game.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations under ₹17b, like Bigbloc Construction, the median CEO pay is around ₹3.3m.

The CEO of Bigbloc Construction was paid just ₹1.3m in total compensation for the year ending March 2022. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is Bigbloc Construction Worth Keeping An Eye On?

One positive for Bigbloc Construction is that it is growing EPS. That's nice to see. Earnings growth might be the main attraction for Bigbloc Construction, but the fun does not stop there. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. It is worth noting though that we have found 1 warning sign for Bigbloc Construction that you need to take into consideration.

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.