Is Now The Time To Put Grindwell Norton (NSE:GRINDWELL) 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Grindwell Norton (NSE:GRINDWELL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Grindwell Norton with the means to add long-term value to shareholders.

Check out our latest analysis for Grindwell Norton

Grindwell Norton's 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Grindwell Norton has grown EPS by 30% per year, compound, in the last three years. So it's not surprising to see the company trades on a very high multiple of (past) 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. Grindwell Norton maintained stable EBIT margins over the last year, all while growing revenue 16% to ₹26b. That's encouraging news for the company!

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?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Grindwell Norton insiders have a significant amount of capital invested in the stock. We note that their impressive stake in the company is worth ₹16b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

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 Grindwell Norton with market caps between ₹167b and ₹533b is about ₹53m.

The Grindwell Norton CEO received total compensation of just ₹18m in the year to March 2023. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Grindwell Norton Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Grindwell Norton's strong EPS growth. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Everyone has their own preferences when it comes to investing but it definitely makes Grindwell Norton look rather interesting indeed. Of course, profit growth is one thing but it's even better if Grindwell Norton 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.

Although Grindwell Norton certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.