Does Tinplate Company Of India (NSE:TINPLATE) Deserve A Spot On Your Watchlist?

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 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.

In contrast to all that, I prefer to spend time on companies like Tinplate Company Of India (NSE:TINPLATE), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Tinplate Company Of India

Tinplate Company Of India's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Impressively, Tinplate Company Of India has grown EPS by 26% per year, compound, in the last 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 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). Not all of Tinplate Company Of India'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. Tinplate Company Of India's EBIT margins are flat but, of some concern, its revenue is actually down. Suffice it to say that is not a great sign of growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Tinplate Company Of India isn't a huge company, given its market capitalization of ₹15b. That makes it extra important to check on its balance sheet strength.

Are Tinplate Company Of India Insiders Aligned With All Shareholders?

As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalizations between ₹7.5b and ₹30b, like Tinplate Company Of India, the median CEO pay is around ₹24m.

The Tinplate Company Of India CEO received ₹19m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. I'd also argue reasonable pay levels attest to good decision making more generally.

Should You Add Tinplate Company Of India To Your Watchlist?

You can't deny that Tinplate Company Of India has grown its earnings per share at a very impressive rate. That's attractive. With swiftly growing earnings, it probably has its best days ahead, and the modest CEO pay suggests the company is careful with cash. So I'd argue this is the kind of stock worth watching, even if it isn't great value today. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Tinplate Company Of India that you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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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