Here's Why We Think Grindwell Norton (NSE:GRINDWELL) Might Deserve Your Attention Today

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Grindwell Norton (NSE:GRINDWELL). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Grindwell Norton

How Fast Is Grindwell Norton Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Grindwell Norton has grown EPS by 25% per year, compound, in the last three years. This has no doubt fuelled the optimism that sees the stock trading on a high multiple of earnings.

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 Grindwell Norton remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 20% to ₹22b. 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.

Fortunately, we've got access to analyst forecasts of Grindwell Norton's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Grindwell Norton Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

With strong conviction, Grindwell Norton insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the company insider, Rajani Seshadri, paid ₹6.4m to buy shares at an average price of ₹1,593. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Along with the insider buying, another encouraging sign for Grindwell Norton is that insiders, as a group, have a considerable shareholding. Notably, they have an enviable stake in the company, worth ₹14b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, B. Santhanam is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Grindwell Norton with market caps between ₹159b and ₹510b is about ₹52m.

The Grindwell Norton CEO received total compensation of just ₹17m in the year to March 2022. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Grindwell Norton To Your Watchlist?

For growth investors, Grindwell Norton's raw rate of earnings growth is a beacon in the night. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. Before you take the next step you should know about the 1 warning sign for Grindwell Norton that we have uncovered.

The good news is that Grindwell Norton is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.