Here's Why Transformers and Rectifiers (India) (NSE:TARIL) Has Caught The Eye Of Investors

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.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Transformers and Rectifiers (India) (NSE:TARIL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Transformers and Rectifiers (India) with the means to add long-term value to shareholders.

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Transformers and Rectifiers (India)'s Improving Profits

Over the last three years, Transformers and Rectifiers (India) has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, Transformers and Rectifiers (India)'s EPS catapulted from ₹4.18 to ₹8.34, over the last year. It's a rarity to see 99% year-on-year growth like that. That could be a sign that the business has reached a true inflection point.

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. Transformers and Rectifiers (India) shareholders can take confidence from the fact that EBIT margins are up from 12% to 15%, and revenue is growing. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

View our latest analysis for Transformers and Rectifiers (India)

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Transformers and Rectifiers (India)'s future EPS 100% free.

Are Transformers and Rectifiers (India) 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 Transformers and Rectifiers (India) will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 68% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. That level of investment from insiders is nothing to sneeze at.

Does Transformers and Rectifiers (India) Deserve A Spot On Your Watchlist?

Transformers and Rectifiers (India)'s earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Transformers and Rectifiers (India) very closely. What about risks? Every company has them, and we've spotted 2 warning signs for Transformers and Rectifiers (India) you should know about.

Although Transformers and Rectifiers (India) certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.