Do Uttam Sugar Mills's (NSE:UTTAMSUGAR) Earnings Warrant Your Attention?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Uttam Sugar Mills (NSE:UTTAMSUGAR). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Uttam Sugar Mills

How Quickly Is Uttam Sugar Mills Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Who among us would not applaud Uttam Sugar Mills's stratospheric annual EPS growth of 51%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Uttam Sugar Mills's EBIT margins were flat over the last year, revenue grew by a solid 10% to ₹18b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Uttam Sugar Mills isn't a huge company, given its market capitalization of ₹7.8b. That makes it extra important to check on its balance sheet strength.

Are Uttam Sugar Mills Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Uttam Sugar Mills shares worth a considerable sum. Indeed, they hold ₹1.9b worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 24% of the company, demonstrating a degree of high-level alignment with shareholders.

Is Uttam Sugar Mills Worth Keeping An Eye On?

Uttam Sugar Mills's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Uttam Sugar Mills is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. It is worth noting though that we have found 3 warning signs for Uttam Sugar Mills (2 are concerning!) that you need to take into consideration.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with 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. 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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