With EPS Growth And More, Sarla Performance Fibers (NSE:SARLAPOLY) Is Interesting

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Sarla Performance Fibers (NSE:SARLAPOLY). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Sarla Performance Fibers

How Fast Is Sarla Performance Fibers Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud Sarla Performance Fibers's stratospheric annual EPS growth of 40%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Sarla Performance Fibers shareholders can take confidence from the fact that EBIT margins are up from 6.3% to 15%, and revenue is growing. That's great to see, on both counts.

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.

Since Sarla Performance Fibers is no giant, with a market capitalization of ₹5.3b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Sarla Performance Fibers Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Sarla Performance Fibers shares, in the last year. So it's definitely nice that Madhusudan Jhunjhunwala bought ₹2.7m worth of shares at an average price of around ₹53.64.

Should You Add Sarla Performance Fibers To Your Watchlist?

Sarla Performance Fibers's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. If you're like me, you'll find it hard to ignore that sort of explosive EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If that's the case, you may regret neglecting to put Sarla Performance Fibers on your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Sarla Performance Fibers (1 can't be ignored) 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.

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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.