Should You Be Adding SPL Industries (NSE:SPLIL) To Your Watchlist Today?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in SPL Industries (NSE:SPLIL). 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 SPL Industries

SPL Industries's Improving Profits

In the last three years SPL Industries's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that SPL Industries's EPS have grown from ₹9.37 to ₹10.78 over twelve months. I doubt many would complain about that 15% gain.

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. While SPL Industries did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

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.

SPL Industries isn't a huge company, given its market capitalization of ₹800m. That makes it extra important to check on its balance sheet strength.

Are SPL Industries Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling SPL Industries shares, in the last year. With that in mind, it's heartening that Kushal Aggarawal, the of the company, paid ₹1.4m for shares at around ₹23.37 each.

On top of the insider buying, we can also see that SPL Industries insiders own a large chunk of the company. Indeed, with a collective holding of 77%, 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, SPL Industries is a very small company, with a market cap of only ₹800m. So despite a large proportional holding, insiders only have ₹619m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add SPL Industries To Your Watchlist?

One positive for SPL Industries is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Before you take the next step you should know about the 2 warning signs for SPL Industries that we have uncovered.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of SPL Industries, 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.

When trading SPL Industries or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.