With EPS Growth And More, Suprajit Engineering (NSE:SUPRAJIT) Makes An Interesting Case

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Suprajit Engineering (NSE:SUPRAJIT). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Suprajit Engineering

How Fast Is Suprajit Engineering Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Suprajit Engineering managed to grow EPS by 9.4% per year, over three years. That's a pretty good rate, if the company can sustain it.

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. EBIT margins for Suprajit Engineering remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to ₹18b. That's encouraging news for the company!

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Suprajit Engineering's forecast profits?

Are Suprajit Engineering 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Suprajit Engineering top brass are certainly in sync, not having sold any shares, over the last year. But the real excitement comes from the ₹5.9m that Founder & Executive Chairman Kula Ajith Rai spent buying shares (at an average price of about ₹293). It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

On top of the insider buying, it's good to see that Suprajit Engineering insiders have a valuable investment in the business. Holding ₹5.4b worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. At 11% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Suprajit Engineering's CEO, Mohan Nagamangala, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between ₹32b and ₹128b, like Suprajit Engineering, the median CEO pay is around ₹29m.

Suprajit Engineering offered total compensation worth ₹15m to its CEO in the year to March 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Suprajit Engineering To Your Watchlist?

One important encouraging feature of Suprajit Engineering is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Suprajit Engineering is trading on a high P/E or a low P/E, relative to its industry.

The good news is that Suprajit Engineering 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. 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.