Here's Why We Think Jyoti CNC Automation (NSE:JYOTICNC) Is Well Worth Watching

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Jyoti CNC Automation (NSE:JYOTICNC). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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

How Fast Is Jyoti CNC Automation Growing Its Earnings Per Share?

Over the last three years, Jyoti CNC Automation has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Jyoti CNC Automation's EPS skyrocketed from ₹8.20 to ₹13.48, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 64%.

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. The good news is that Jyoti CNC Automation is growing revenues, and EBIT margins improved by 6.6 percentage points to 24%, over the last year. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

View our latest analysis for Jyoti CNC Automation

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Jyoti CNC Automation's balance sheet strength, before getting too excited.

Are Jyoti CNC Automation Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So we're pleased to report that Jyoti CNC Automation insiders own a meaningful share of the business. Indeed, with a collective holding of 59%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. At the current share price, that insider holding is worth a staggering ₹160b. That level of investment from insiders is nothing to sneeze at.

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. 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 Jyoti CNC Automation with market caps between ₹171b and ₹548b is about ₹53m.

Jyoti CNC Automation's CEO took home a total compensation package of ₹13m in the year prior to March 2024. First impressions seem to indicate a compensation policy that is favourable to shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Jyoti CNC Automation To Your Watchlist?

You can't deny that Jyoti CNC Automation has grown its earnings per share at a very impressive rate. That's attractive. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. This may only be a fast rundown, but the key takeaway is that Jyoti CNC Automation is worth keeping an eye on. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Jyoti CNC Automation shapes up to industry peers, when it comes to ROE.

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.