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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In contrast to all that, I prefer to spend time on companies like SPL Industries (NSE:SPLIL), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

See our latest analysis for SPL Industries

SPL Industries's Improving Profits

Over the last three years, SPL Industries has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Over twelve months, SPL Industries increased its EPS from ₹9.15 to ₹9.64. That amounts to a small improvement of 5.4%.

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. SPL Industries'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.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

SPL Industries isn't a huge company, given its market capitalization of ₹851m. That makes it extra important to check on its balance sheet strength.

Are SPL Industries 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

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.

And the insider buying isn't the only sign of alignment between shareholders and the board, since SPL Industries insiders own more than a third of the company. Indeed, with a collective holding of 75%, 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 ₹851m. That means insiders only have ₹638m 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.

Does SPL Industries Deserve A Spot On Your Watchlist?

One positive for SPL Industries is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. Still, you should learn about the 1 warning sign we've spotted with SPL Industries .

The good news is that SPL Industries is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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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