Here's Why We Think Thangamayil Jewellery (NSE:THANGAMAYL) Is Well Worth Watching

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.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Thangamayil Jewellery (NSE:THANGAMAYL). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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 Thangamayil Jewellery

Thangamayil Jewellery's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Who among us would not applaud Thangamayil Jewellery's stratospheric annual EPS growth of 48%, compound, over the last three years? Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Thangamayil Jewellery maintained stable EBIT margins over the last year, all while growing revenue 17% to ₹17b. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Thangamayil Jewellery isn't a huge company, given its market capitalization of ₹3.7b. That makes it extra important to check on its balance sheet strength.

Are Thangamayil Jewellery Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's good to see Thangamayil Jewellery insiders walking the walk, by spending ₹18m on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. It is also worth noting that it was Founder Balusamy Darmini who made the biggest single purchase, worth ₹3.3m, paying ₹297 per share.

On top of the insider buying, we can also see that Thangamayil Jewellery insiders own a large chunk of the company. In fact, they own 44% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. With that sort of holding, insiders have about ₹1.6b riding on the stock, at current prices. That's nothing to sneeze at!

Should You Add Thangamayil Jewellery To Your Watchlist?

Thangamayil Jewellery's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. What's more insiders own a significant stake in the company and have been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Thangamayil Jewellery belongs on the top of your watchlist. Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Thangamayil Jewellery (2 are a bit concerning) you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Thangamayil Jewellery, you'll probably love this free list of growing companies that insiders are buying.

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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