Here's Why Felix Industries (NSE:FELIX) Has Caught The Eye Of Investors

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Felix Industries (NSE:FELIX). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Felix Industries

Felix Industries' Improving Profits

In the last three years Felix Industries' 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. Thus, it makes sense to focus on more recent growth rates, instead. Felix Industries' EPS skyrocketed from ₹1.63 to ₹2.30, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 41%.

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 Felix Industries did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

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.

Felix Industries isn't a huge company, given its market capitalisation of ₹504m. That makes it extra important to check on its balance sheet strength.

Are Felix Industries Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Felix Industries 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 73% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Valued at only ₹504m Felix Industries is really small for a listed company. So this large proportion of shares owned by insiders only amounts to ₹369m. That might not be a huge sum but it should be enough to keep insiders motivated!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations under ₹17b, like Felix Industries, the median CEO pay is around ₹3.4m.

The CEO of Felix Industries was paid just ₹1.8m in total compensation for the year ending March 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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.

Is Felix Industries Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Felix Industries' strong EPS growth. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. The overarching message here is that Felix Industries has underlying strengths that make it worth a look at. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Felix Industries (at least 3 which can't be ignored) , and understanding them should be part of your investment process.

Although Felix 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.