I Ran A Stock Scan For Earnings Growth And United Polyfab Gujarat (NSE:UNITEDPOLY) Passed With Ease

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 the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like United Polyfab Gujarat (NSE:UNITEDPOLY). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for United Polyfab Gujarat

How Fast Is United Polyfab Gujarat Growing Its Earnings Per Share?

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that United Polyfab Gujarat grew its EPS from ₹0.26 to ₹4.49, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. On the one hand, United Polyfab Gujarat's EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

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

United Polyfab Gujarat isn't a huge company, given its market capitalization of ₹573m. That makes it extra important to check on its balance sheet strength.

Are United Polyfab Gujarat 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.

United Polyfab Gujarat top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Chairman of the Board & MD, Gagan Nirmal Mittal, paid ₹7.7m to buy shares at an average price of ₹8.60.

And the insider buying isn't the only sign of alignment between shareholders and the board, since United Polyfab Gujarat insiders own more than a third of the company. In fact, they own 38% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only ₹573m United Polyfab Gujarat is really small for a listed company. That means insiders only have ₹219m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Gagan Nirmal Mittal is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like United Polyfab Gujarat with market caps under ₹16b is about ₹3.0m.

The CEO of United Polyfab Gujarat was paid just ₹1.3m in total compensation for the year ending . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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. It can also be a sign of good governance, more generally.

Does United Polyfab Gujarat Deserve A Spot On Your Watchlist?

United Polyfab Gujarat's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe United Polyfab Gujarat deserves timely attention. It is worth noting though that we have found 3 warning signs for United Polyfab Gujarat (2 are potentially serious!) 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 United Polyfab Gujarat, 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.