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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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like Surevin BPO Services (NSE:SUREVIN). 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. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
View our latest analysis for Surevin BPO Services
How Fast Is Surevin BPO Services 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). It's no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, Surevin BPO Services's EPS has grown 32% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
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. The good news is that Surevin BPO Services is growing revenues, and EBIT margins improved by 6 percentage points to 19%, over the last year. That's great to see, on both counts.
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.
Surevin BPO Services isn't a huge company, given its market capitalization of ₹352m. That makes it extra important to check on its balance sheet strength.
Are Surevin BPO Services 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 we're pleased to report that Surevin BPO Services insiders own a meaningful share of the business. Indeed, with a collective holding of 68%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. Of course, Surevin BPO Services is a very small company, with a market cap of only ₹352m. So despite a large proportional holding, insiders only have ₹241m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!