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 BLIS Technologies (NZSE:BLT), which has not only revenues, but also profits. 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.
BLIS Technologies's Improving Profits
In the last three years BLIS Technologies's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that BLIS Technologies's EPS have grown from NZ$0.0014 to NZ$0.0017 over twelve months. I doubt many would complain about that 21% gain.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note BLIS Technologies's EBIT margins were flat over the last year, revenue grew by a solid 7.9% to NZ$12m. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
Since BLIS Technologies is no giant, with a market capitalization of NZ$91m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are BLIS Technologies Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that BLIS Technologies insiders have a significant amount of capital invested in the stock. Indeed, they hold NZ$20m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 22% of the company; visible skin in the game.
Should You Add BLIS Technologies To Your Watchlist?
As I already mentioned, BLIS Technologies is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. However, before you get too excited we've discovered 2 warning signs for BLIS Technologies (1 doesn't sit too well with us!) that you should be aware of.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
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. 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.
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