Here's Why I Think Texmo Pipes and Products (NSE:TEXMOPIPES) Might Deserve Your Attention Today

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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 Texmo Pipes and Products (NSE:TEXMOPIPES). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Texmo Pipes and Products

How Fast Is Texmo Pipes and Products Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Texmo Pipes and Products boosted its trailing twelve month EPS from ₹1.29 to ₹1.52, in the last year. That's a 18% gain; respectable growth in the broader scheme of things.

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). Texmo Pipes and Products's EBIT margins are flat but, of some concern, its revenue is actually down. And that does make me a little more cautious of the stock.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Texmo Pipes and Products isn't a huge company, given its market capitalization of ₹408m. That makes it extra important to check on its balance sheet strength.

Are Texmo Pipes and Products Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Texmo Pipes and Products insiders own a meaningful share of the business. In fact, they own 36% of the shares, making insiders a very influential shareholder group. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. Valued at only ₹408m Texmo Pipes and Products is really small for a listed company. That means insiders only have ₹146m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Texmo Pipes and Products with market caps under ₹15b is about ₹4.2m.

The CEO of Texmo Pipes and Products was paid just ₹1.6m in total compensation for the year ending . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Texmo Pipes and Products Worth Keeping An Eye On?

As I already mentioned, Texmo Pipes and Products is a growing business, which is what I like to see. Earnings growth might be the main game for Texmo Pipes and Products, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. What about risks? Every company has them, and we've spotted 2 warning signs for Texmo Pipes and Products (of which 1 is concerning!) you should know about.

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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