Goyal Aluminiums (NSE:GOYALALUM) Ticks All The Boxes When It Comes To Earnings Growth

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Goyal Aluminiums (NSE:GOYALALUM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Goyal Aluminiums with the means to add long-term value to shareholders.

Check out our latest analysis for Goyal Aluminiums

Goyal Aluminiums' Earnings Per Share Are Growing

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. Goyal Aluminiums' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 56%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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 Goyal Aluminiums remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to ₹714m. That's a real positive.

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.

Since Goyal Aluminiums is no giant, with a market capitalisation of ₹1.5b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Goyal Aluminiums Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Goyal Aluminiums insiders own a significant number of shares certainly is appealing. In fact, they own 79% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Of course, Goyal Aluminiums is a very small company, with a market cap of only ₹1.5b. That means insiders only have ₹1.2b worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Goyal Aluminiums with market caps under ₹17b is about ₹3.5m.

The Goyal Aluminiums CEO received total compensation of only ₹1.5m in the year to March 2024. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. 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. It can also be a sign of good governance, more generally.

Does Goyal Aluminiums Deserve A Spot On Your Watchlist?

Goyal Aluminiums' earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so the writing on the wall tells us that Goyal Aluminiums is worth considering carefully. It is worth noting though that we have found 1 warning sign for Goyal Aluminiums that you need to take into consideration.

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.