If EPS Growth Is Important To You, Shriram Pistons & Rings (NSE:SHRIPISTON) Presents An Opportunity

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Shriram Pistons & Rings (NSE:SHRIPISTON). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shriram Pistons & Rings with the means to add long-term value to shareholders.

View our latest analysis for Shriram Pistons & Rings

Shriram Pistons & Rings' Improving Profits

Shriram Pistons & Rings has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Shriram Pistons & Rings' EPS catapulted from ₹43.14 to ₹77.45, over the last year. It's not often a company can achieve year-on-year growth of 80%.

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. The good news is that Shriram Pistons & Rings is growing revenues, and EBIT margins improved by 4.9 percentage points to 16%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Shriram Pistons & Rings' balance sheet strength, before getting too excited.

Are Shriram Pistons & Rings Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Shriram Pistons & Rings insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth ₹18b. This totals to 34% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Very encouraging.

Is Shriram Pistons & Rings Worth Keeping An Eye On?

Shriram Pistons & Rings' earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Shriram Pistons & Rings very closely. It is worth noting though that we have found 2 warning signs for Shriram Pistons & Rings that you need to take into consideration.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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. 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.