Do Kabra Extrusiontechnik's (NSE:KABRAEXTRU) Earnings Warrant Your Attention?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Kabra Extrusiontechnik (NSE:KABRAEXTRU). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Kabra Extrusiontechnik

Kabra Extrusiontechnik's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Kabra Extrusiontechnik grew its EPS by 8.3% per year. That growth rate is fairly good, assuming the company can keep it up.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Kabra Extrusiontechnik shareholders can take confidence from the fact that EBIT margins are up from 6.0% to 12%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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.

Since Kabra Extrusiontechnik is no giant, with a market capitalization of ₹9.7b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Kabra Extrusiontechnik Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news for Kabra Extrusiontechnik shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Shreevallabh Kabra, the Executive Chairman & MD of the company, paid ₹2.5m for shares at around ₹193 each.

On top of the insider buying, we can also see that Kabra Extrusiontechnik insiders own a large chunk of the company. In fact, they own 53% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about ₹5.2b riding on the stock, at current prices. That's nothing to sneeze at!

Is Kabra Extrusiontechnik Worth Keeping An Eye On?

One positive for Kabra Extrusiontechnik is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Still, you should learn about the 2 warning signs we've spotted with Kabra Extrusiontechnik (including 1 which is a bit concerning) .

The good news is that Kabra Extrusiontechnik 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.