Some have more money than common sense, they say, so even businesses with no income, no profit, and a record of failure can easily find investors. Unfortunately, high-risk investments are often unlikely to pay off, and many investors pay a price to learn their lesson.
So if you’re like me, you might be more interested in profitable and growing businesses like Novita (WSE: NVT). Now, I’m not saying the stock is necessarily undervalued today; but I cannot shake the appreciation of the profitability of the company itself. In comparison, loss-making companies act like a sponge for capital – but unlike such a sponge, they don’t always produce something when in a hurry.
Check out our latest review for Novita
How fast is Novita increasing its earnings per share?
Over the past three years, Novita has increased its earnings per share (EPS) like a young bamboo after the rain; fast, and from a low base. So I don’t think the percentage growth rate is particularly significant. As a result, I’ll zoom in on last year’s growth instead. Like a firecracker in the night sky, Novita’s EPS has gone from 9.47z to 23.54z, over the past year. You don’t see 148% year-over-year growth like that, very often. The best scenario? That the company has reached a real inflection point.
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). Novita shareholders can rely on the fact that EBIT margins have increased from 17% to 32% and turnover is increasing. 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. Click on the graph to see the exact numbers.
Since Novita is not a giant, with a market cap of Z 420million, so you should definitely check its cash flow and debt. before too excited about his prospects.
Are Novita Insiders Aligned with All Shareholders?
I like that business leaders have some skin in the game, so to speak, because it increases the alignment of incentives between the people who run the business and its real owners. So it’s good to see that Novita insiders have significant capital invested in the stock. Indeed, they hold 116 million z of its stock. This shows strong buy-in and may indicate a belief in business strategy. This represents 28% of the company, demonstrating a high level of alignment with shareholders.
Does Novita deserve a spot on your watchlist?
Novita’s earnings per share took off like a rocket pointed straight at the moon. This BPA growth certainly has my attention, and the large insider ownership only serves to pique my interest further. The hope is, of course, that the strong growth marks a fundamental improvement in the business economy. So yes, on this short review, I think it’s worth considering Novita for a place on your watch list. Still, you should educate yourself about 2 warning signs we spotted with Novita.
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.
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 material. Simply Wall St has no position in the mentioned stocks.
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