If EPS Growth Is Important To You, Somi Conveyor Beltings (NSE:SOMICONVEY) Presents An Opportunity

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Somi Conveyor Beltings (NSE:SOMICONVEY), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Somi Conveyor Beltings

How Fast Is Somi Conveyor Beltings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Somi Conveyor Beltings has managed to grow EPS by 26% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Somi Conveyor Beltings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 61% to ₹1.1b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Since Somi Conveyor Beltings is no giant, with a market capitalisation of ₹1.2b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Somi Conveyor Beltings 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 those who are interested in Somi Conveyor Beltings will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 52% of the company, so their decisions have a significant impact on their investments. 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. Of course, Somi Conveyor Beltings is a very small company, with a market cap of only ₹1.2b. That means insiders only have ₹616m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Somi Conveyor Beltings To Your Watchlist?

For growth investors, Somi Conveyor Beltings' raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. You still need to take note of risks, for example - Somi Conveyor Beltings has 2 warning signs (and 1 which is potentially serious) we think you should know about.

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.

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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.