Should You Be Adding Bio Planet (WSE:BIP) To Your Watchlist Today?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Bio Planet (WSE:BIP), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Bio Planet

How Fast Is Bio Planet Growing Its Earnings Per Share?

Over the last three years, Bio Planet has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Bio Planet's EPS shot from zł0.65 to zł1.78, over the last year. Year on year growth of 173% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

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). Bio Planet maintained stable EBIT margins over the last year, all while growing revenue 33% to zł204m. 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.

Since Bio Planet is no giant, with a market capitalization of zł108m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Bio Planet 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 Bio Planet insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 54%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have zł59m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Bio Planet To Your Watchlist?

Bio Planet's earnings per share have taken off like a rocket aimed right at the moon. 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 to my mind Bio Planet is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that Bio Planet is showing 5 warning signs in our investment analysis , and 2 of those are potentially serious...

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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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