Here's Why We Think SPML Infra (NSE:SPMLINFRA) Might Deserve Your Attention Today

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like SPML Infra (NSE:SPMLINFRA). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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SPML Infra's Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. Which is why EPS growth is looked upon so favourably. Commendations have to be given in seeing that SPML Infra grew its EPS from ₹1.12 to ₹6.57, in one short year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future.

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. While SPML Infra may have maintained EBIT margins over the last year, revenue has fallen. While this may raise concerns, investors should investigate the reasoning behind this.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

View our latest analysis for SPML Infra

Since SPML Infra is no giant, with a market capitalisation of ₹21b, you should definitely check its cash and debt before getting too excited about its prospects.

Are SPML Infra Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own SPML Infra shares worth a considerable sum. Indeed, they hold ₹1.8b worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 8.6% of the company; visible skin in the game.

Is SPML Infra Worth Keeping An Eye On?

SPML Infra's earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, SPML Infra is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Still, you should learn about the 3 warning signs we've spotted with SPML Infra (including 1 which is concerning).

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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.