We Ran A Stock Scan For Earnings Growth And Grindwell Norton (NSE:GRINDWELL) Passed With Ease

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. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Grindwell Norton (NSE:GRINDWELL), which has not only revenues, but also profits. 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.

Check out the opportunities and risks within the IN Machinery industry.

How Fast Is Grindwell Norton Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Grindwell Norton has managed to grow EPS by 24% per year over three years. This has no doubt fuelled the optimism that sees the stock trading on a high multiple of earnings.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. 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 22% to ₹23b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Grindwell Norton?

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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the real excitement comes from the ₹6.4m that company insider Rajani Seshadri spent buying shares (at an average price of about ₹1,593). Strong buying like that could be a sign of opportunity.

The good news, alongside the insider buying, for Grindwell Norton bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enviable stake in the company, worth ₹15b. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. The cherry on top is that the CEO, B. Santhanam is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Grindwell Norton, with market caps between ₹162b and ₹518b, is around ₹52m.

Grindwell Norton's CEO took home a total compensation package of ₹17m in the year prior to March 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of 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. 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. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. These things considered, this is one stock worth watching. We should say that we've discovered 2 warning signs for Grindwell Norton (1 is concerning!) that you should be aware of before investing here.

Keen growth investors love to see insider buying. Thankfully, Grindwell Norton 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.