Here's Why We Think CyberTech Systems and Software (NSE:CYBERTECH) Is Well Worth Watching

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In contrast to all that, I prefer to spend time on companies like CyberTech Systems and Software (NSE:CYBERTECH), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for CyberTech Systems and Software

CyberTech Systems and Software's Earnings Per Share Are Growing.

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 means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud CyberTech Systems and Software's stratospheric annual EPS growth of 39%, compound, 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.

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 7.2% to ₹1.2b. That's a real positive.

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 CyberTech Systems and Software is no giant, with a market capitalization of ₹3.4b, so you should definitely check its cash and debt before getting too excited about its prospects.

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 we're pleased to report that CyberTech Systems and Software insiders own a meaningful share of the business. In fact, they own 47% of the shares, making insiders a very influential shareholder group. 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 ₹1.6b 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. Well, based on the CEO pay, I'd say they are indeed. For companies with market capitalizations under ₹15b, like CyberTech Systems and Software, the median CEO pay is around ₹3.2m.

The CyberTech Systems and Software CEO received total compensation of only ₹140k in the year to . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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.

Is CyberTech Systems and Software Worth Keeping An Eye On?

CyberTech Systems and Software's earnings have taken off like any random crypto-currency did, back in 2017. 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. CyberTech Systems and Software certainly ticks a few of my boxes, so I think it's probably well worth further consideration. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with CyberTech Systems and Software , and understanding them should be part of your investment process.

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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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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