Here's Why We Think Bigbloc Construction (NSE:BIGBLOC) Might Deserve Your Attention Today

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Bigbloc Construction (NSE:BIGBLOC). 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

Bigbloc Construction's Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that Bigbloc Construction grew its EPS from ₹0.91 to ₹3.29, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. The good news is that Bigbloc Construction is growing revenues, and EBIT margins improved by 6.6 percentage points to 15%, over the last year. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Bigbloc Construction is no giant, with a market capitalisation of ₹8.4b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Bigbloc Construction 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 we're pleased to report that Bigbloc Construction insiders own a meaningful share of the business. Actually, with 37% of the company to their names, insiders are profoundly invested in the business. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. To give you an idea, the value of insiders' holdings in the business are valued at ₹3.2b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

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. A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Bigbloc Construction with market caps under ₹16b is about ₹3.0m.

The Bigbloc Construction CEO received total compensation of only ₹260k in the year to March 2021. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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.

Does Bigbloc Construction Deserve A Spot On Your Watchlist?

Bigbloc Construction's earnings per share growth have been climbing higher at an appreciable rate. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Bigbloc Construction certainly ticks a few boxes, so we think it's probably well worth further consideration. You should always think about risks though. Case in point, we've spotted 1 warning sign for Bigbloc Construction you should be aware of.

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.