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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Bliss GVS Pharma (NSE:BLISSGVS). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. 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.
How Fast Is Bliss GVS Pharma Growing?
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Bliss GVS Pharma managed to grow EPS by 14% per year, over three years. That's a good rate of growth, if it can be sustained.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Bliss GVS Pharma's EBIT margins were flat over the last year, revenue grew by a solid 150% to ₹8.9b. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail check this interactive graph.
Since Bliss GVS Pharma is no giant, with a market capitalization of ₹14b, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Bliss GVS Pharma 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 as you can imagine, the fact that Bliss GVS Pharma insiders own a significant number of shares certainly appeals to me. In fact, they own 42% of the shares, making insiders a very influential shareholder group. 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. In terms of absolute value, insiders have ₹6.0b invested in the business, using the current share price. That's nothing to sneeze at!
Is Bliss GVS Pharma Worth Keeping An Eye On?
As I already mentioned, Bliss GVS Pharma is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Of course, just because Bliss GVS Pharma is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
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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