Is Now The Time To Put Refex Industries (NSE:REFEX) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Refex Industries (NSE:REFEX), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Refex Industries with the means to add long-term value to shareholders.

See our latest analysis for Refex Industries

Refex Industries' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Refex Industries' EPS has grown 35% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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 Refex Industries remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 267% to ₹16b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Refex Industries isn't a huge company, given its market capitalisation of ₹13b. That makes it extra important to check on its balance sheet strength.

Are Refex Industries Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalisations between ₹8.3b and ₹33b, like Refex Industries, the median CEO pay is around ₹17m.

Refex Industries offered total compensation worth ₹8.4m to its CEO in the year to March 2022. That comes in below the average for similar sized companies and seems pretty reasonable. 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.

Should You Add Refex Industries To Your Watchlist?

For growth investors, Refex Industries' raw rate of earnings growth is a beacon in the night. Strong EPS growth is a great look for the company and reasonable CEO compensation sweetens the deal for investors ass it alludes to management being conscious of frivolous spending. Based on these factors, this stock may well deserve a spot on your watchlist, or even a little further research. Before you take the next step you should know about the 4 warning signs for Refex Industries (2 are a bit unpleasant!) that we have uncovered.

Although Refex Industries certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.