Here's Why Fidel Softech (NSE:FIDEL) Has Caught The Eye Of Investors

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Fidel Softech (NSE:FIDEL), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Fidel Softech

How Fast Is Fidel Softech Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Fidel Softech has grown EPS by 10.0% per year. That's a pretty good rate, if the company can sustain it.

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. EBIT margins for Fidel Softech remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 35% to ₹516m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Fidel Softech isn't a huge company, given its market capitalisation of ₹1.8b. That makes it extra important to check on its balance sheet strength.

Are Fidel Softech Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Insiders both bought and sold Fidel Softech shares in the last year, but the good news is they spent ₹1.3m more buying than they netted selling. So, on balance, the insider transactions are mildly encouraging. We also note that it was the Executive Chairman, Sunil Kulkarni, who made the biggest single acquisition, paying ₹1.7m for shares at about ₹115 each.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Fidel Softech will reveal that insiders own a significant piece of the pie. In fact, they own 73% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Although, with Fidel Softech being valued at ₹1.8b, this is a small company we're talking about. So this large proportion of shares owned by insiders only amounts to ₹1.3b. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Fidel Softech To Your Watchlist?

One important encouraging feature of Fidel Softech is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Still, you should learn about the 1 warning sign we've spotted with Fidel Softech.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Fidel Softech, you'll probably love this curated collection of companies in IN that have an attractive valuation alongside 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.