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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.
So if you're like me, you might be more interested in profitable, growing companies, like Dev Information Technology (NSE:DEVIT). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
View our latest analysis for Dev Information Technology
How Quickly Is Dev Information Technology 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. We can see that in the last three years Dev Information Technology grew its EPS by 13% per year. That's a good rate of growth, if it can be sustained.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Dev Information Technology's EBIT margins were flat over the last year, revenue grew by a solid 12% to ₹776m. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
Dev Information Technology isn't a huge company, given its market capitalization of ₹486m. That makes it extra important to check on its balance sheet strength.
Are Dev Information Technology Insiders Aligned With All Shareholders?
Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Dev Information Technology insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 75%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only ₹486m Dev Information Technology is really small for a listed company. That means insiders only have ₹362m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!