Should You Be Adding Bisalloy Steel Group (ASX:BIS) To Your Watchlist Today?




  • In Business
  • 2021-11-27 22:16:37Z
  • By Simply Wall St.
 

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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Bisalloy Steel Group (ASX:BIS). 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.

View our latest analysis for Bisalloy Steel Group

Bisalloy Steel Group's Earnings Per Share Are 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 means EPS growth is considered a real positive by most successful long-term investors. Impressively, Bisalloy Steel Group has grown EPS by 33% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Bisalloy Steel Group's EBIT margins have actually improved by 2.6 percentage points in the last year, to reach 11%, but, on the flip side, revenue was down 5.3%. That falls short of ideal.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Since Bisalloy Steel Group is no giant, with a market capitalization of AU$82m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Bisalloy Steel Group Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's worth noting that there was some insider selling of Bisalloy Steel Group shares last year, worth -AU$9.2k. But that is far less than the large AU$92k share acquisition by Non-Executive Director Ian Greenyer.

Along with the insider buying, another encouraging sign for Bisalloy Steel Group is that insiders, as a group, have a considerable shareholding. Indeed, they hold AU$20m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 25% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Bisalloy Steel Group Deserve A Spot On Your Watchlist?

You can't deny that Bisalloy Steel Group has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Bisalloy Steel Group that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Bisalloy Steel Group, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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