Here's Why We Think Gokul Refoils & Solvent (NSE:GOKUL) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Gokul Refoils & Solvent (NSE:GOKUL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Gokul Refoils & Solvent with the means to add long-term value to shareholders.

View our latest analysis for Gokul Refoils & Solvent

How Quickly Is Gokul Refoils & Solvent Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Gokul Refoils & Solvent's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 43%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Gokul Refoils & Solvent achieved similar EBIT margins to last year, revenue grew by a solid 24% to ₹31b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Gokul Refoils & Solvent isn't a huge company, given its market capitalisation of ₹3.4b. That makes it extra important to check on its balance sheet strength.

Are Gokul Refoils & Solvent Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Gokul Refoils & Solvent insiders own a significant number of shares certainly is appealing. In fact, they own 57% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. In terms of absolute value, insiders have ₹2.0b invested in the business, at the current share price. That's nothing to sneeze at!

Is Gokul Refoils & Solvent Worth Keeping An Eye On?

Gokul Refoils & Solvent's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Gokul Refoils & Solvent for a spot on your watchlist. What about risks? Every company has them, and we've spotted 3 warning signs for Gokul Refoils & Solvent (of which 2 don't sit too well with us!) you should know about.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.