Should You Be Adding Interbud-Lublin (WSE:ITB) To Your Watchlist Today?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Interbud-Lublin (WSE:ITB). 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 Interbud-Lublin

How Quickly Is Interbud-Lublin Increasing Earnings Per Share?

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 makes EPS growth an attractive quality for any company. We can see that in the last three years Interbud-Lublin grew its EPS by 13% 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 Interbud-Lublin remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 111% to zł49m. 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.

Since Interbud-Lublin is no giant, with a market capitalisation of zł10m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Interbud-Lublin 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 Interbud-Lublin insiders own a meaningful share of the business. In fact, they own 68% 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. Of course, Interbud-Lublin is a very small company, with a market cap of only zł10m. So despite a large proportional holding, insiders only have zł6.8m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Interbud-Lublin with market caps under zł839m is about zł532k.

Interbud-Lublin's CEO only received compensation totalling zł181k in the year to December 2021. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Interbud-Lublin To Your Watchlist?

One important encouraging feature of Interbud-Lublin is that it is growing profits. Earnings growth might be the main attraction for Interbud-Lublin, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. What about risks? Every company has them, and we've spotted 5 warning signs for Interbud-Lublin (of which 3 make us uncomfortable!) you should know about.

Although Interbud-Lublin certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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. 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.