Here's Why We Think Safari Industries (India) (NSE:SAFARI) Is Well Worth Watching

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Safari Industries (India) (NSE:SAFARI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Safari Industries (India) with the means to add long-term value to shareholders.

Check out our latest analysis for Safari Industries (India)

How Fast Is Safari Industries (India) Growing Its Earnings Per Share?

Over the last three years, Safari Industries (India) has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Safari Industries (India) boosted its trailing twelve month EPS from ₹30.87 to ₹34.85, in the last year. There's little doubt shareholders would be happy with that 13% gain.

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. Safari Industries (India) maintained stable EBIT margins over the last year, all while growing revenue 17% to ₹16b. That's a real positive.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Safari Industries (India)'s future EPS 100% free.

Are Safari Industries (India) 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 as you can imagine, the fact that Safari Industries (India) insiders own a significant number of shares certainly is appealing. Owning 43% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. And their holding is extremely valuable at the current share price, totalling ₹52b. This is an incredible endorsement from them.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Safari Industries (India) with market caps between ₹84b and ₹268b is about ₹42m.

Safari Industries (India) offered total compensation worth ₹25m to its CEO in the year to March 2024. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Safari Industries (India) To Your Watchlist?

One important encouraging feature of Safari Industries (India) is that it is growing profits. The fact that EPS is growing is a genuine positive for Safari Industries (India), but the pleasant picture gets better than that. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. Even so, be aware that Safari Industries (India) is showing 2 warning signs in our investment analysis , you should know about...

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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.