Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. 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.
So if you're like me, you might be more interested in profitable, growing companies, like Garware Technical Fibres (NSE:GARFIBRES). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
How Fast Is Garware Technical Fibres Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Garware Technical Fibres managed to grow EPS by 16% per year, over three years. That's a pretty good rate, if the company can sustain it.
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. The good news is that Garware Technical Fibres is growing revenues, and EBIT margins improved by 2.9 percentage points to 18%, over the last year. That's great to see, on both counts.
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.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Garware Technical Fibres's balance sheet strength, before getting too excited.
Are Garware Technical Fibres Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Garware Technical Fibres insiders have a significant amount of capital invested in the stock. Given insiders own a small fortune of shares, currently valued at ₹4.6b, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.
Should You Add Garware Technical Fibres To Your Watchlist?
One positive for Garware Technical Fibres is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Now, you could try to make up your mind on Garware Technical Fibres by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
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. 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.
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