Is it time to put DB (International) Stock Brokers (NSE:DBSTOCKBRO) on your watchlist?

Like a puppy chasing its tail, some new investors are often looking for “the next big thing,” even if that means buying “history stocks” with no revenue, let alone 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 and growing companies, like DB Securities Brokers (International) (NSE: DBSTOCKBRO). Now, I’m not saying the stock is necessarily undervalued today; but I can’t help but appreciate the profitability of the business itself. Loss-making businesses are always in a race against time to achieve financial viability, but time is often the friend of a profitable business, especially if it is growing.

See our latest analysis for DB (International) Stock Brokers

DB (International) Stock Brokers Earnings Improvement

In a capitalist society, capital drives out profits, which means stock prices tend to rise with earnings per share (EPS). So like the hint of a smile on a face I love, growing EPS usually makes me look twice. So you can imagine it almost knocked my socks off when I realized that DB (International) Stock Brokers increased their EPS from ₹0.36 to ₹1.90, in a single year. While this rate of growth is unlikely to be repeated, it looks like a breakout improvement. But the key is to discern if something deep has changed or if it’s just a one-time nudge.

One way to check a company’s growth is to look at the evolution of its revenues and its earnings before interest and taxes (EBIT) margins. I note that the earnings of DB (International) Stock Brokers operations was lower than its turnover over the last twelve months, which could distort my analysis of its margins. DB (International) Stock Brokers has maintained stable EBIT margins over the past year, while growing revenue by 85% to ₹273m. It is progress.

The chart below shows how the company’s top and bottom line has grown over time. For more details, click on the image.

NSEI: DBSTOCKBRO Earnings & Revenue History February 4, 2022

DB (International) Stock Brokers is not a big company, considering its market capitalization of ₹1.2 billion. It is therefore very important to check the strength of its balance sheet.

Are DB (International) Stock Brokers insiders aligned with all shareholders?

Many consider high insider shareholding to be a strong sign of alignment between a company’s executives and ordinary shareholders. So, as you can imagine, the fact that DB (International) Stock Brokers insiders hold a significant number of shares certainly appeals to me. Indeed, they own 56% of the company, so they will share the same delights and challenges experienced by ordinary shareholders. To me, this is a good sign as it suggests that they will be incentivized to create long-term shareholder value. Valued at only ₹1.2 billion DB (International) Stock Brokers is really small for a listed company. This means that insiders only have ₹663 million of shares, despite the large proportional stake. It may not be a huge sum, but it should be enough to motivate insiders!

Should you add DB (International) Stock Brokers to your watchlist?

DB (International) Stock Brokers’ profits took off like any random cryptocurrency in 2017. This type of growth is simply eye-catching, and the significant investment held by insiders certainly informs my view of the business. Sometimes rapid EPS growth is a sign that the business has reached an inflection point; and I like those. So, in my opinion, DB (International) Stock Brokers is worth putting on your watch list; after all, shareholders succeed when the market undervalues ​​fast-growing companies. However, before you get too excited, we found out 3 warning signs for DB (International) Stock Brokers of which you should be aware.

Of course, you can (sometimes) buy stocks that are not increased income and not have insiders buying stocks. But as a growth investor, I always like to check out companies that To do have these characteristics. You can access a free list of them here.

Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Dolores W. Simon