For newbies, it might seem like a good idea (and an exciting prospect) to buy a business that tells a good story to investors, even if it lacks a history of revenue and profit altogether. And in their study entitled Who is the prey of the Wolf of Wall Street? ‘ Leuz and. Al. Found that it is “quite common” for investors to lose money by purchasing “pump and dump” programs.
In the age of investing in the blue sky of tech stocks, my choice may seem old-fashioned; I always prefer profitable businesses like Zydus well-being (NSE: ZYDUSWELL). Even if stocks are fully valued today, most capitalists would recognize its benefits as a demonstration of constant value generation. While a well-funded business can suffer losses for years to come, unless its owners have an endless appetite to subsidize the customer, it will eventually have to generate a profit, or else take its last breath.
Check out our latest review for Zydus Wellness
How fast does Zydus Wellness increase earnings per share?
If a company can sustain earnings per share (EPS) growth long enough, its stock price will eventually follow. This means that growing EPS is seen as a real benefit by most successful long-term investors. Over the past three years, Zydus Wellness has increased its BPA by 8.1% per year. It’s a good rate of growth, if it can be sustained.
One way to check the growth of a business is to look at how its income and profit before interest and tax (EBIT) have changed. While we note that Zydus Wellness’s EBIT margins were stable over the past year, revenue grew 16% to 20 billion yen. It is progress.
You can take a look at the company’s revenue and profit growth trend, in the graph below. To see the actual numbers, click on the graph.
In investing, as in life, the future matters more than the past. So why not watch this free interactive visualization of Zydus Wellness’s forecast benefits?
Are Zydus Wellness Insiders Aligned with All Shareholders?
I feel more secure owning shares in a company if insiders also own shares, thereby aligning our interests more closely. So it is good to see that Zydus Wellness insiders have a significant amount of capital invested in the stock. Notably, they own a huge stake in the company, worth 9.4 billion yen. I would find that kind of skin in the game quite encouraging, if I owned any stocks, as it would ensure that the leaders of the company would also experience my success, or failure, with the action.
It means a lot to see insiders investing in the company, but I wonder if the compensation policies are shareholder friendly. A brief analysis of CEO compensation suggests they are. I found that the median total compensation of CEOs of companies like Zydus Wellness with market caps between 75 billion yen and 240 billion yen is around 32 million yen.
The CEO of Zydus Wellness received total compensation of just 13 million yen in the year to. This is clearly well below par, so at first glance this arrangement seems generous to shareholders and indicates a culture of modest compensation. CEO compensation isn’t the most important aspect of a business to consider, but when it’s reasonable, it gives me a little more confidence that leaders are looking out for the interests of shareholders. I would also say that reasonable pay levels are a testament to good decision making more generally.
Should You Add Zydus Wellness To Your Watchlist?
An important encouraging feature of Zydus Wellness is that it increases its benefits. The fact that EPS is growing is a real plus for Zydus Wellness, but the beautiful picture is better than that. Boasting both a modest CEO salary and considerable insider ownership, I would say this one is at least worthy of the watchlist. Still, you should educate yourself on 1 warning sign we spotted with Zydus Wellness.
Of course, you can (sometimes) buy stocks that are not growing income and not have insiders who buy stocks. But as a growth investor, I always like to check out companies that to do have these characteristics. You can access a free list of them here.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
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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 any stock 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.