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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in IZMO (NSE:IZMO). While profit is not necessarily a social good, it's easy to admire a business that 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 IZMO Growing Its Earnings Per Share?
Over the last three years, IZMO has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, IZMO's EPS shot from ₹8.53 to ₹20.38, over the last year. Year on year growth of 139% is certainly a sight to behold.
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. While we note IZMO's EBIT margins were flat over the last year, revenue grew by a solid 15% to ₹1.2b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Since IZMO is no giant, with a market capitalization of ₹1.3b, so you should definitely check its cash and debt before getting too excited about its prospects.
Are IZMO 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 IZMO insiders own a significant number of shares certainly appeals to me. Actually, with 47% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only ₹1.3b IZMO is really small for a listed company. So despite a large proportional holding, insiders only have ₹609m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.
Is IZMO Worth Keeping An Eye On?
IZMO's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering IZMO for a spot on your watchlist. We should say that we've discovered 2 warning signs for IZMO that you should be aware of before investing here.
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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