Does G N A Axles (NSE:GNA) Deserve A Spot On Your Watchlist?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. 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.

So if you're like me, you might be more interested in profitable, growing companies, like G N A Axles (NSE:GNA). 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.

View our latest analysis for G N A Axles

G N A Axles's Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that G N A Axles has managed to grow EPS by 23% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that G N A Axles is growing revenues, and EBIT margins improved by 7.2 percentage points to 12%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Since G N A Axles is no giant, with a market capitalization of ₹17b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are G N A Axles Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that G N A Axles insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 68%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have ₹11b invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add G N A Axles To Your Watchlist?

For growth investors like me, G N A Axles's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with G N A Axles (at least 2 which are concerning) , and understanding them should be part of your investment process.

Although G N A Axles certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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