If EPS Growth Is Important To You, Ultra Wiring Connectivity System (NSE:UWCSL) Presents An Opportunity

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. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Ultra Wiring Connectivity System (NSE:UWCSL), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Ultra Wiring Connectivity System

How Quickly Is Ultra Wiring Connectivity System Increasing Earnings Per Share?

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) outcomes. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Ultra Wiring Connectivity System has managed to grow EPS by 36% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. EBIT margins for Ultra Wiring Connectivity System remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 50% to ₹443m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Ultra Wiring Connectivity System isn't a huge company, given its market capitalisation of ₹591m. That makes it extra important to check on its balance sheet strength.

Are Ultra Wiring Connectivity System Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

The good news for Ultra Wiring Connectivity System shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Chairman & MD Sanjay Mathur bought ₹2.8m worth of shares at an average price of around ₹92.16. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Ultra Wiring Connectivity System.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Ultra Wiring Connectivity System will reveal that insiders own a significant piece of the pie. In fact, they own 51% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Although, with Ultra Wiring Connectivity System being valued at ₹591m, this is a small company we're talking about. That means insiders only have ₹303m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Ultra Wiring Connectivity System To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Ultra Wiring Connectivity System's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. These things considered, this is one stock worth watching. However, before you get too excited we've discovered 2 warning signs for Ultra Wiring Connectivity System that you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Ultra Wiring Connectivity System 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.