Do Garden Reach Shipbuilders & Engineers' (NSE:GRSE) Earnings Warrant Your Attention?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Garden Reach Shipbuilders & Engineers (NSE:GRSE). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Garden Reach Shipbuilders & Engineers' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Recognition must be given to the that Garden Reach Shipbuilders & Engineers has grown EPS by 41% per year, over the last three years. 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. Garden Reach Shipbuilders & Engineers maintained stable EBIT margins over the last year, all while growing revenue 41% to ₹51b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

View our latest analysis for Garden Reach Shipbuilders & Engineers

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

Are Garden Reach Shipbuilders & Engineers Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Garden Reach Shipbuilders & Engineers followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold ₹4.1b worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 1.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between ₹173b and ₹554b, like Garden Reach Shipbuilders & Engineers, the median CEO pay is around ₹53m.

The Garden Reach Shipbuilders & Engineers CEO received total compensation of just ₹7.6m in the year to March 2024. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Garden Reach Shipbuilders & Engineers Worth Keeping An Eye On?

Garden Reach Shipbuilders & Engineers' earnings per share have been soaring, with growth rates sky high. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Garden Reach Shipbuilders & Engineers is certainly doing some things right and is well worth investigating. It is worth noting though that we have found 2 warning signs for Garden Reach Shipbuilders & Engineers (1 is a bit concerning!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.