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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. 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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Indiabulls Ventures (NSE:IBVENTURES). 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.
Check out our latest analysis for Indiabulls Ventures
Indiabulls Ventures's Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. 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 Indiabulls Ventures has grown EPS by 49% 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.
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. Not all of Indiabulls Ventures's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Indiabulls Ventures maintained stable EBIT margins over the last year, all while growing revenue 138% to ₹19b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Indiabulls Ventures's balance sheet strength, before getting too excited.
Are Indiabulls Ventures 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. As a result, I'm encouraged by the fact that insiders own Indiabulls Ventures shares worth a considerable sum. Indeed, they have a glittering mountain of wealth invested in it, currently valued at ₹21b. Coming in at 13% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.