Here's Why We Think Bisalloy Steel Group (ASX:BIS) Is Well Worth Watching
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
In contrast to all that, I prefer to spend time on companies like Bisalloy Steel Group (ASX:BIS), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.
View our latest analysis for Bisalloy Steel Group
How Quickly Is Bisalloy Steel Group Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Bisalloy Steel Group has grown EPS by 41% 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. The good news is that Bisalloy Steel Group is growing revenues, and EBIT margins improved by 4.8 percentage points to 15%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Bisalloy Steel Group isn't a huge company, given its market capitalization of AU$84m. That makes it extra important to check on its balance sheet strength.
Are Bisalloy Steel Group Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Over the last 12 months Bisalloy Steel Group insiders spent AU$92k more buying shares than they received from selling them. Although I don't particularly like to see selling, the fact that they put more capital in, than they extracted, is a positive in my mind. We also note that it was the Director, Michael Gundy, who made the biggest single acquisition, paying AU$96k for shares at about AU$1.55 each.
Along with the insider buying, another encouraging sign for Bisalloy Steel Group is that insiders, as a group, have a considerable shareholding. To be specific, they have AU$20m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 24% of the company; visible skin in the game.
Should You Add Bisalloy Steel Group To Your Watchlist?
Bisalloy Steel Group's earnings have taken off like any random crypto-currency did, back in 2017. Just as heartening; insiders both own and are buying more stock. Because of the potential that it has reached an inflection point, I'd suggest Bisalloy Steel Group belongs on the top of your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Bisalloy Steel Group that you should be aware of.
As a growth investor I do like to see insider buying. But Bisalloy Steel Group isn't the only one. You can see a 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.
