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 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.” data-reactid=”18″>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 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.In contrast to all that, I prefer to spend time on companies like Polyplex ( NSE:POLYPLEX ), 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.
Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.Check out our latest analysis for Polyplex How Fast Is Polyplex 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).
That makes EPS growth an attractive quality for any company.I, for one, am blown away by the fact that Polyplex has grown EPS by 57% per year, 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.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.Polyplex shareholders can take confidence from the fact that EBIT margins are up from 10% to 13%, and revenue is growing.
Ticking those two boxes is a good sign of growth, in my book.In the chart below, you can see how the company has grown earnings, and revenue, over time.
Click on the chart to see the exact numbers.More Of course the knack is to find stocks that have their best days in the future, not in the past.
You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Polyplex .Are Polyplex Insiders Aligned With All Shareholders? It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests.So it is good to see that Polyplex insiders have a significant amount of capital invested in the stock.Indeed, they hold ₹1.5b worth of its stock.That’s a lot of money, and no small incentive to work hard.
Those holdings account for over 9.7% of the company; visible skin in the game.Is Polyplex Worth Keeping An Eye On? Polyplex’s earnings have taken off like any random crypto-currency did, back in 2017.That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company.The hope is, of course, that the strong growth marks a fundamental improvement in the business economics.So yes, on this short analysis I do think it’s worth considering Polyplex for a spot on your watchlist.One of Buffett’s considerations when discussing businesses is if they are capital light or capital intensive.Generally, a company with a high return on equity is capital light, and can thus fund growth more easily.
So you might want to check this graph comparing Polyplex’s ROE with industry peers (and the market at large) .Although Polyplex 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 We aim to bring you long-term focused research analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.If you spot an error that warrants correction, please contact the editor at .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.
Simply Wall St has no position in the stocks mentioned.Thank you for reading..