It is only natural that many investors, especially those new to the game, would rather buy “hot†stocks with a good story, even if those companies are losing money. But the reality is that when a business loses money every year, for long enough, its investors will usually take their share of those losses.
So if you’re like me, you might be more interested in profitable and growing businesses like Poly-medicine (NSE: POLYMED). While profit isn’t necessarily social good, it’s easy to admire a business that can consistently produce it. Conversely, a loss-making company has yet to prove itself with profit, and eventually the sweet milk of external capital can turn sour.
Check out our latest review for Poly Medicure
How fast is Poly Medicure increasing its earnings per share?
If a company can sustain earnings per share (EPS) growth long enough, its stock price will eventually follow. So it’s no surprise that I like to invest in companies with growing EPS. As a tree regularly reaches the sky, Poly Medicure’s EPS has increased by 25% each year, compound, over three years. It is therefore not surprising to see the company trading at a very high multiple of its (past) profits.
I like to see revenue growth as an indication that growth is sustainable, and I look for a high profit margin before interest and taxes (EBIT) to indicate a competitive gap (although some low-margin companies also have ditches). The good news is that Poly Medicure is increasing revenue and EBIT margins have improved 2.1 percentage points to 21% over the past year. Checking those two boxes is a good sign of growth in my book.
The graph below shows how the company’s bottom line has progressed over time. For more details, click on the image.
While profitability is the driving force behind the upswing, cautious investors are also always checking the balance sheet.
Are Poly Medicure Insiders Aligned With All Shareholders?
Personally, I like to see strong insider ownership of a company because it suggests that it will be managed for the benefit of the shareholders. We are therefore happy to report that Poly Medicure insiders own a significant share of the business. In fact, with 47% of the business in their name, insiders are deeply invested in the business. I am always comforted by strong insider ownership like this because it implies that those who run the company are genuinely motivated to create shareholder value. At the current share price, this insider stake is worth 45 billion yen. This means that they have a lot of their own capital riding on the performance of the business!
Does Poly Medicure Deserve A Place On Your Watchlist?
You cannot deny that Poly Medicure has increased its earnings per share at a very impressive rate. It is attractive. I think the growth in BPA is something to brag about, and it doesn’t surprise me that insiders are keeping a considerable share of stocks. So this is most likely the kind of business that I like to spend time researching, in order to discern its true value. You should always take note of the risks, for example – Poly Medicure has 1 warning sign we think you should be aware.
You can invest in any business. But if you’d rather focus on stocks that have demonstrated insider buying, here’s a list of companies that have made insider buying in the past three months.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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