If EPS Growth Is Important To You, GHCL Textiles (NSE:GHCLTEXTIL) Presents An Opportunity

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like GHCL Textiles (NSE:GHCLTEXTIL). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for GHCL Textiles

GHCL Textiles' Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. It is awe-striking that GHCL Textiles' EPS went from ₹0.31 to ₹4.93 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note GHCL Textiles achieved similar EBIT margins to last year, revenue grew by a solid 113% to ₹11b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

GHCL Textiles isn't a huge company, given its market capitalisation of ₹10b. That makes it extra important to check on its balance sheet strength.

Are GHCL Textiles Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

A great takeaway for shareholders is that company insiders within GHCL Textiles have collectively spent ₹701k acquiring shares in the company. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling.

Should You Add GHCL Textiles To Your Watchlist?

GHCL Textiles' earnings have taken off in quite an impressive fashion. Growth-minded people will be intrigued by the incredible movement in EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If this is the case, then keeping a watch over GHCL Textiles could be in your best interest. Of course, just because GHCL Textiles is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of GHCL Textiles, you'll probably love this curated collection of companies in IN that have an attractive valuation alongside 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. 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.