Here's Why We Think Emkay Taps and Cutting Tools (NSE:EMKAYTOOLS) Might Deserve Your Attention Today

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. 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. 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.

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 Emkay Taps and Cutting Tools (NSE:EMKAYTOOLS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Emkay Taps and Cutting Tools with the means to add long-term value to shareholders.

Check out our latest analysis for Emkay Taps and Cutting Tools

How Fast Is Emkay Taps and Cutting Tools Growing Its Earnings Per Share?

In the last three years Emkay Taps and Cutting Tools' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Emkay Taps and Cutting Tools' EPS skyrocketed from ₹22.33 to ₹33.04, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 48%.

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 Emkay Taps and Cutting Tools' 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. Emkay Taps and Cutting Tools shareholders can take confidence from the fact that EBIT margins are up from 45% to 52%, and revenue is growing. Both of which are great metrics to check off for potential growth.

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.

Emkay Taps and Cutting Tools isn't a huge company, given its market capitalisation of ₹3.0b. That makes it extra important to check on its balance sheet strength.

Are Emkay Taps and Cutting Tools 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

With strong conviction, Emkay Taps and Cutting Tools insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the Chairman, Ajayprakash Kanoria, paid ₹7.3m to buy shares at an average price of ₹154. 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, we can also see that Emkay Taps and Cutting Tools insiders own a large chunk of the company. In fact, they own 51% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. To give you an idea, the value of insiders' holdings in the business are valued at ₹1.6b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Is Emkay Taps and Cutting Tools Worth Keeping An Eye On?

For growth investors, Emkay Taps and Cutting Tools' raw rate of earnings growth is a beacon in the night. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. You still need to take note of risks, for example - Emkay Taps and Cutting Tools has 2 warning signs we think you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Emkay Taps and Cutting Tools 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.