Do NRB Bearings' (NSE:NRBBEARING) 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 currently lacks a track record of revenue and 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.

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 NRB Bearings (NSE:NRBBEARING). 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.

Check out our latest analysis for NRB Bearings

How Fast Is NRB Bearings Growing Its Earnings Per Share?

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It's an outstanding feat for NRB Bearings to have grown EPS from ₹7.88 to ₹25.05 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement.

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 music to the ears of NRB Bearings shareholders is that EBIT margins have grown from 11% to 14% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

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

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 NRB Bearings' balance sheet strength, before getting too excited.

Are NRB Bearings 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.

It's pleasing to note that insiders spent ₹131m buying NRB Bearings shares, over the last year, without reporting any share sales whatsoever. Knowing this, NRB Bearings will have have all eyes on them in anticipation for the what could happen in the near future. We also note that it was the company insider, Aziz Zaveri, who made the biggest single acquisition, paying ₹31m for shares at about ₹253 each.

On top of the insider buying, it's good to see that NRB Bearings insiders have a valuable investment in the business. Holding ₹5.4b worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. Amounting to 16% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.

Should You Add NRB Bearings To Your Watchlist?

NRB Bearings' earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe NRB Bearings deserves timely attention. However, before you get too excited we've discovered 3 warning signs for NRB Bearings (1 is a bit concerning!) that you should be aware of.

Keen growth investors love to see insider activity. Thankfully, NRB Bearings isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by high insider ownership.

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.