Yahoo Finance Is Now The Time To Put Byotrol (LON:BYOT) On Your Watchlist?
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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Byotrol (LON:BYOT). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
Check out our latest analysis for Byotrol
Byotrol's Improving Profits
In the last three years Byotrol'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. Like a firecracker arcing through the night sky, Byotrol's EPS shot from UK£0.0016 to UK£0.0045, over the last year. You don't see 184% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.
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). Byotrol shareholders can take confidence from the fact that EBIT margins are up from 8.9% to 12%, and revenue is growing. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Since Byotrol is no giant, with a market capitalization of UK£25m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Byotrol 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. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
The good news for Byotrol shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Nicholos Hellyer, the CFO & Executive Director of the company, paid UK£10k for shares at around UK£0.077 each.
It's reassuring that Byotrol insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. I refer to the very reasonable level of CEO pay. For companies with market capitalizations under UK£146m, like Byotrol, the median CEO pay is around UK£242k.
The Byotrol CEO received UK£135k in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Does Byotrol Deserve A Spot On Your Watchlist?
Byotrol's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Better yet, we can observe insider buying and the chief executive pay looks reasonable. The strong EPS growth suggests Byotrol may be at an inflection point. If so, then it the potential for further gains probably merit a spot on your watchlist. Before you take the next step you should know about the 2 warning signs for Byotrol (1 is potentially serious!) that we have uncovered.
As a growth investor I do like to see insider buying. But Byotrol 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.
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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