Should You Be Adding Liberty Shoes (NSE:LIBERTSHOE) To Your Watchlist Today?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Liberty Shoes (NSE:LIBERTSHOE). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Liberty Shoes

How Fast Is Liberty Shoes Growing Its Earnings Per Share?

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Liberty Shoes' EPS shot up from ₹4.44 to ₹6.31; a result that's bound to keep shareholders happy. That's a fantastic gain of 42%.

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. It was a year of stability for Liberty Shoes as both revenue and EBIT margins remained have been flat over the past year. That's not bad, but it doesn't point to ongoing future growth, either.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Liberty Shoes is no giant, with a market capitalisation of ₹7.7b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Liberty Shoes 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 those who are interested in Liberty Shoes will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Actually, with 38% of the company to their names, insiders are profoundly invested in the business. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have ₹3.0b invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Does Liberty Shoes Deserve A Spot On Your Watchlist?

You can't deny that Liberty Shoes has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Before you take the next step you should know about the 2 warning signs for Liberty Shoes that we have uncovered.

Although Liberty Shoes 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.