Does GMM Pfaudler (NSE:GMMPFAUDLR) Deserve A Spot On Your Watchlist?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in GMM Pfaudler (NSE:GMMPFAUDLR). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for GMM Pfaudler

How Quickly Is GMM Pfaudler Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. It certainly is nice to see that GMM Pfaudler has managed to grow EPS by 27% per year over three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note GMM Pfaudler's EBIT margins were flat over the last year, revenue grew by a solid 13% to ₹6.7b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future GMM Pfaudler EPS 100% free.

Are GMM Pfaudler Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that GMM Pfaudler insiders have a significant amount of capital invested in the stock. Given insiders own a small fortune of shares, currently valued at ₹7.0b, they have plenty of motivation to push the business to succeed. That holding amounts to 12% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Is GMM Pfaudler Worth Keeping An Eye On?

You can't deny that GMM Pfaudler has grown its earnings per share at a very impressive rate. That's attractive. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Of course, profit growth is one thing but it's even better if GMM Pfaudler is receiving high returns on equity, since that should imply it can keep growing without much need for capital. Click on this link to see how it is faring against the average in its industry.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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. 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.
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