Does Suumaya Industries (NSE:SUULD) Deserve A Spot On Your Watchlist?

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like Suumaya Industries (NSE:SUULD), which has not only revenues, but also profits. 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.

Check out our latest analysis for Suumaya Industries

How Fast Is Suumaya Industries Growing Its Earnings Per Share?

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Suumaya Industries's EPS went from ₹5.63 to ₹57.89 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Suumaya Industries shareholders can take confidence from the fact that EBIT margins are up from 9.5% to 15%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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 Suumaya Industries is no giant, with a market capitalization of ₹15b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Suumaya Industries Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

One positive for Suumaya Industries, is that company insiders paid ₹1.9m for shares in the last year. While this isn't much, we also note an absence of sales.

On top of the insider buying, it's good to see that Suumaya Industries insiders have a valuable investment in the business. To be specific, they have ₹3.6b worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 24% of the company; visible skin in the game.

Should You Add Suumaya Industries To Your Watchlist?

Suumaya Industries's earnings per share have taken off like a rocket aimed right at the moon. Just as heartening; insiders both own and are buying more stock. Because of the potential that it has reached an inflection point, I'd suggest Suumaya Industries belongs on the top of your watchlist. It is worth noting though that we have found 3 warning signs for Suumaya Industries (1 shouldn't be ignored!) that you need to take into consideration.

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

When trading Suumaya Industries or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.