Do Kotyark Industries' (NSE:KOTYARK) Earnings Warrant Your Attention?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Kotyark Industries (NSE:KOTYARK). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Kotyark Industries

Kotyark Industries' Improving Profits

Over the last three years, Kotyark Industries has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Kotyark Industries' EPS grew from ₹13.46 to ₹25.42, over the previous 12 months. It's not often a company can achieve year-on-year growth of 89%. The best case scenario? That the business has hit a true inflection point.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Kotyark Industries remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 139% to ₹2.7b. That's a real positive.

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.

Kotyark Industries isn't a huge company, given its market capitalisation of ₹8.1b. That makes it extra important to check on its balance sheet strength.

Are Kotyark Industries Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

Although we did see some insider selling (worth ₹9.2m) this was overshadowed by a mountain of buying, totalling ₹101m in just one year. This adds to the interest in Kotyark Industries because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was company insider Jesmin Shah who made the biggest single purchase, worth ₹78m, paying ₹780 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Kotyark Industries insiders own more than a third of the company. Indeed, with a collective holding of 82%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. To give you an idea, the value of insiders' holdings in the business are valued at ₹6.7b at the current share price. That's nothing to sneeze at!

Should You Add Kotyark Industries To Your Watchlist?

Kotyark Industries' earnings have taken off in quite an impressive fashion. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Kotyark Industries belongs near the top of your watchlist. Still, you should learn about the 5 warning signs we've spotted with Kotyark Industries (including 2 which are a bit concerning).

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Kotyark Industries, you'll probably love this curated collection of companies in IN that have an attractive valuation alongside insider buying in the last three months.

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.