If EPS Growth Is Important To You, Transformers and Rectifiers (India) (NSE:TRIL) Presents An Opportunity

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Transformers and Rectifiers (India) (NSE:TRIL). 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.

See our latest analysis for Transformers and Rectifiers (India)

How Fast Is Transformers and Rectifiers (India) Growing Its Earnings Per Share?

In the last three years Transformers and Rectifiers (India)'s earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Transformers and Rectifiers (India)'s EPS grew from ₹1.00 to ₹1.84, over the previous 12 months. It's not often a company can achieve year-on-year growth of 85%. 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. EBIT margins for Transformers and Rectifiers (India) remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 35% to ₹13b. 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 Transformers and Rectifiers (India) is no giant, with a market capitalisation of ₹8.2b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Transformers and Rectifiers (India) Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Transformers and Rectifiers (India) insiders own a meaningful share of the business. Indeed, with a collective holding of 75%, company insiders are in control and have plenty of capital behind the venture. 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. To give you an idea, the value of insiders' holdings in the business are valued at ₹6.2b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Is Transformers and Rectifiers (India) Worth Keeping An Eye On?

Transformers and Rectifiers (India)'s earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Transformers and Rectifiers (India) very closely. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Transformers and Rectifiers (India) that you should be aware of.

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 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.