Here's Why We Think Hi-Tech Gears (NSE:HITECHGEAR) Might Deserve Your Attention Today

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Hi-Tech Gears (NSE:HITECHGEAR). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Hi-Tech Gears

Hi-Tech Gears' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Hi-Tech Gears has achieved impressive annual EPS growth of 56%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. This approach makes Hi-Tech Gears look pretty good, on balance; although revenue is flattish, EBIT margins improved from 3.6% to 6.4% in the last year. Which is a great look for the company.

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.

Hi-Tech Gears isn't a huge company, given its market capitalisation of ₹7.8b. That makes it extra important to check on its balance sheet strength.

Are Hi-Tech Gears Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.

One positive for Hi-Tech Gears, is that company insiders spent ₹2.2m acquiring shares in the last year. While this isn't much, we also note an absence of sales. We also note that it was the company insider, Aabha Kapuria, who made the biggest single acquisition, paying ₹1.1m for shares at about ₹276 each.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Hi-Tech Gears will reveal that insiders own a significant piece of the pie. Indeed, with a collective holding of 54%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. In terms of absolute value, insiders have ₹4.2b invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Does Hi-Tech Gears Deserve A Spot On Your Watchlist?

Hi-Tech Gears' earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Hi-Tech Gears belongs near the top of your watchlist. We don't want to rain on the parade too much, but we did also find 4 warning signs for Hi-Tech Gears (1 is potentially serious!) that you need to be mindful of.

Keen growth investors love to see insider buying. Thankfully, Hi-Tech Gears isn't the only one. You can see a 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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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.