If You Like EPS Growth Then Check Out K.M. Sugar Mills (NSE:KMSUGAR) Before It's Too Late

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. 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.

So if you're like me, you might be more interested in profitable, growing companies, like K.M. Sugar Mills (NSE:KMSUGAR). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for K.M. Sugar Mills

K.M. Sugar Mills's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, K.M. Sugar Mills's EPS has grown 28% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. K.M. Sugar Mills's EBIT margins have actually improved by 2.8 percentage points in the last year, to reach 10%, but, on the flip side, revenue was down 13%. That falls short of ideal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

K.M. Sugar Mills isn't a huge company, given its market capitalization of ₹2.6b. That makes it extra important to check on its balance sheet strength.

Are K.M. Sugar Mills 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 K.M. Sugar Mills insiders own a meaningful share of the business. In fact, they own 51% 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 ₹1.3b invested in the business, using the current share price. That's nothing to sneeze at!

Does K.M. Sugar Mills Deserve A Spot On Your Watchlist?

For growth investors like me, K.M. Sugar Mills'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. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. You should always think about risks though. Case in point, we've spotted 2 warning signs for K.M. Sugar Mills you should be aware of.

Although K.M. Sugar Mills 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.

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.