Should You Be Adding IZMO (NSE:IZMO) To Your Watchlist Today?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

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). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for IZMO

How Quickly Is IZMO Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that IZMO has grown EPS by 46% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note IZMO's EBIT margins were flat over the last year, revenue grew by a solid 12% to ₹1.1b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

IZMO isn't a huge company, given its market capitalization of ₹672m. That makes it extra important to check on its balance sheet strength.

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 we're pleased to report that IZMO insiders own a meaningful share of the business. Actually, with 46% of the company to their names, insiders are profoundly invested in the business. 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. Of course, IZMO is a very small company, with a market cap of only ₹672m. That means insiders only have ₹311m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does IZMO Deserve A Spot On Your Watchlist?

IZMO's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. 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. However, before you get too excited we've discovered 2 warning signs for IZMO (1 can't be ignored!) that you should be aware of.

Although IZMO certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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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