Here's Why We Think ASBISc Enterprises (WSE:ASB) Is Well Worth Watching

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in ASBISc Enterprises (WSE:ASB). 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 ASBISc Enterprises

How Fast Is ASBISc Enterprises Growing Its Earnings Per Share?

Over the last three years, ASBISc Enterprises 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. 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, ASBISc Enterprises's EPS shot from US$0.66 to US$1.38, over the last year. Year on year growth of 109% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note ASBISc Enterprises's EBIT margins were flat over the last year, revenue grew by a solid 30% to US$3.1b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since ASBISc Enterprises is no giant, with a market capitalization of zł746m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are ASBISc Enterprises 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 ASBISc Enterprises insiders own a significant number of shares certainly appeals to me. In fact, they own 39% of the shares, making insiders a very influential shareholder group. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. In terms of absolute value, insiders have US$290m 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 ASBISc Enterprises To Your Watchlist?

ASBISc Enterprises's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering ASBISc Enterprises for a spot on your watchlist. Even so, be aware that ASBISc Enterprises is showing 3 warning signs in our investment analysis , and 1 of those is 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. 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.