With EPS Growth And More, Gokul Refoils & Solvent (NSE:GOKUL) Is Interesting

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 completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Gokul Refoils & Solvent (NSE:GOKUL). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

See our latest analysis for Gokul Refoils & Solvent

Gokul Refoils & Solvent's Improving Profits

In the last three years Gokul Refoils & Solvent's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Gokul Refoils & Solvent's EPS soared from ₹1.25 to ₹2.04, in just one year. That's a commendable gain of 63%.

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. It seems Gokul Refoils & Solvent is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not a major concern but nor does it point to the long term growth we like to see.

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 capitalization of ₹1.8b. That makes it extra important to check on its balance sheet strength.

Are Gokul Refoils & Solvent Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that Gokul Refoils & Solvent insiders own a meaningful share of the business. In fact, they own 60% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. In terms of absolute value, insiders have ₹1.1b invested in the business, using the current share price. That's nothing to sneeze at!

Should You Add Gokul Refoils & Solvent To Your Watchlist?

For growth investors like me, Gokul Refoils & Solvent's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. However, before you get too excited we've discovered 3 warning signs for Gokul Refoils & Solvent (1 is significant!) that you should be aware of.

Although Gokul Refoils & Solvent certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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. 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.
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