Here's Why I Think CyberTech Systems and Software (NSE:CYBERTECH) Is An Interesting Stock

By
Simply Wall St
Published
June 03, 2021
NSEI:CYBERTECH
Source: Shutterstock

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like CyberTech Systems and Software (NSE:CYBERTECH). 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.

Check out our latest analysis for CyberTech Systems and Software

CyberTech Systems and Software's Improving Profits

In the last three years CyberTech Systems and Software's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, CyberTech Systems and Software's EPS shot from ₹4.81 to ₹8.74, over the last year. You don't see 82% year-on-year growth like that, very often.

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 CyberTech Systems and Software's EBIT margins were flat over the last year, revenue grew by a solid 4.4% to ₹1.2b. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NSEI:CYBERTECH Earnings and Revenue History June 4th 2021

CyberTech Systems and Software isn't a huge company, given its market capitalization of ₹3.9b. That makes it extra important to check on its balance sheet strength.

Are CyberTech Systems and Software 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 CyberTech Systems and Software 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. In terms of absolute value, insiders have ₹1.9b invested in the business, using the current share price. That's nothing to sneeze at!

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like CyberTech Systems and Software with market caps under ₹15b is about ₹3.0m.

The CEO of CyberTech Systems and Software was paid just ₹140k in total compensation for the year ending . 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 compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Should You Add CyberTech Systems and Software To Your Watchlist?

CyberTech Systems and Software's earnings per share have taken off like a rocket aimed right at the moon. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so I do think CyberTech Systems and Software is worth considering carefully. We should say that we've discovered 1 warning sign for CyberTech Systems and Software that you should be aware of before investing here.

Although CyberTech Systems and Software 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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