Should You Be Adding United Polyfab Gujarat (NSE:UNITEDPOLY) To Your Watchlist Today?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

In contrast to all that, many investors prefer to focus on companies like United Polyfab Gujarat (NSE:UNITEDPOLY), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for United Polyfab Gujarat

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

In the last three years United Polyfab Gujarat's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. United Polyfab Gujarat boosted its trailing twelve month EPS from ₹2.61 to ₹3.15, in the last year. There's little doubt shareholders would be happy with that 21% gain.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for United Polyfab Gujarat remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 39% to ₹9.1b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since United Polyfab Gujarat is no giant, with a market capitalisation of ₹1.9b, you should definitely check its cash and debt before getting too excited about its prospects.

Are United Polyfab Gujarat Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in United Polyfab Gujarat will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Actually, with 43% of the company to their names, insiders are profoundly invested in the business. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. Although, with United Polyfab Gujarat being valued at ₹1.9b, this is a small company we're talking about. So despite a large proportional holding, insiders only have ₹825m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

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. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations under ₹17b, like United Polyfab Gujarat, the median CEO pay is around ₹3.2m.

The CEO of United Polyfab Gujarat was paid just ₹1.3m in total compensation for the year ending March 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is United Polyfab Gujarat Worth Keeping An Eye On?

One important encouraging feature of United Polyfab Gujarat is that it is growing profits. The growth of EPS may be the eye-catching headline for United Polyfab Gujarat, but there's more to bring joy for shareholders. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. We don't want to rain on the parade too much, but we did also find 2 warning signs for United Polyfab Gujarat (1 makes us a bit uncomfortable!) that you need to be mindful of.

Although United Polyfab Gujarat certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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

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

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.