If You Like EPS Growth Then Check Out Sarla Performance Fibers (NSE:SARLAPOLY) Before It's Too Late

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like Sarla Performance Fibers (NSE:SARLAPOLY), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Sarla Performance Fibers

How Quickly Is Sarla Performance Fibers Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Sarla Performance Fibers has managed to grow EPS by 25% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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 Sarla Performance Fibers is growing revenues, and EBIT margins improved by 7.4 percentage points to 15%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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

Sarla Performance Fibers isn't a huge company, given its market capitalization of ₹3.6b. That makes it extra important to check on its balance sheet strength.

Are Sarla Performance Fibers Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We haven't seen any insiders selling Sarla Performance Fibers shares, in the last year. So it's definitely nice that Madhusudan Jhunjhunwala bought ₹1.9m worth of shares at an average price of around ₹19.60.

Is Sarla Performance Fibers Worth Keeping An Eye On?

For growth investors like me, Sarla Performance Fibers's raw rate of earnings growth is a beacon in the night. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. To put it succinctly; Sarla Performance Fibers is a strong candidate for your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Sarla Performance Fibers (1 makes us a bit uncomfortable) you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Sarla Performance Fibers, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

If you decide to trade Sarla Performance Fibers, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.