Does Ashoka Metcast (NSE:ASHOKAMET) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Ashoka Metcast (NSE:ASHOKAMET). 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 Ashoka Metcast

Ashoka Metcast's Improving Profits

Over the last three years, Ashoka Metcast has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Ashoka Metcast's EPS grew from ₹1.26 to ₹3.57, over the previous 12 months. It's a rarity to see 184% year-on-year growth like that. That could be a sign that the business has reached a true inflection point.

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. Our analysis has highlighted that Ashoka Metcast's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. The music to the ears of Ashoka Metcast shareholders is that EBIT margins have grown from 9.2% to 15% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Ashoka Metcast isn't a huge company, given its market capitalisation of ₹669m. That makes it extra important to check on its balance sheet strength.

Are Ashoka Metcast Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Ashoka Metcast will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Indeed, with a collective holding of 58%, company insiders are in control and have plenty of capital behind the venture. 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. Of course, Ashoka Metcast is a very small company, with a market cap of only ₹669m. So this large proportion of shares owned by insiders only amounts to ₹391m. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does Ashoka Metcast Deserve A Spot On Your Watchlist?

Ashoka Metcast's earnings have taken off in quite an impressive fashion. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. 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 Ashoka Metcast very closely. You should always think about risks though. Case in point, we've spotted 1 warning sign for Ashoka Metcast you should be aware of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

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.