Do Manomay Tex India's (NSE:MANOMAY) Earnings Warrant Your Attention?

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Manomay Tex India (NSE:MANOMAY), which has not only revenues, but also profits. 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 Manomay Tex India

How Fast Is Manomay Tex India Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Manomay Tex India has managed to grow EPS by 25% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Manomay Tex India's EBIT margins have actually improved by 2.0 percentage points in the last year, to reach 6.7%, but, on the flip side, revenue was down 9.7%. That's not a good look.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Manomay Tex India is no giant, with a market capitalisation of ₹3.4b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Manomay Tex India Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Any way you look at it Manomay Tex India shareholders can gain quiet confidence from the fact that insiders shelled out ₹31m to buy stock, over the last year. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. It is also worth noting that it was Chairman of the Board & Whole Time Director Kailashchandra Laddha who made the biggest single purchase, worth ₹5.7m, paying ₹222 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Manomay Tex India insiders own more than a third of the company. In fact, they own 55% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. With that sort of holding, insiders have about ₹1.9b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is Manomay Tex India Worth Keeping An Eye On?

You can't deny that Manomay Tex India has grown its earnings per share at a very impressive rate. That's attractive. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. However, before you get too excited we've discovered 2 warning signs for Manomay Tex India (1 is concerning!) that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Manomay Tex India, 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.