Does Uttam Sugar Mills (NSE:UTTAMSUGAR) Deserve A Spot On Your Watchlist?

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. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Uttam Sugar Mills (NSE:UTTAMSUGAR), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Uttam Sugar Mills

Uttam Sugar Mills' Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Uttam Sugar Mills has grown EPS by 34% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Uttam Sugar Mills is growing revenues, and EBIT margins improved by 2.5 percentage points to 12%, over the last year. Both of which are great metrics to check off for potential growth.

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.

Since Uttam Sugar Mills is no giant, with a market capitalisation of ₹13b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Uttam Sugar Mills 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

First things first, there weren't any reports of insiders selling shares in Uttam Sugar Mills in the last 12 months. But the important part is that Chairman & MD Raj Adlakha spent ₹22m buying stock, at an average price of ₹449. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

On top of the insider buying, it's good to see that Uttam Sugar Mills insiders have a valuable investment in the business. As a matter of fact, their holding is valued at ₹2.7b. This considerable investment should help drive long-term value in the business. That amounts to 21% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Uttam Sugar Mills To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Uttam Sugar Mills' strong EPS growth. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. These things considered, this is one stock worth watching. However, before you get too excited we've discovered 2 warning signs for Uttam Sugar Mills that you should be aware of.

The good news is that Uttam Sugar Mills is not the only growth stock with insider buying. Here's a list of growth-focused companies in IN 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. 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.