Here's Why Uttam Sugar Mills (NSE:UTTAMSUGAR) Has Caught The Eye Of Investors

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 currently 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.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Uttam Sugar Mills

How Quickly Is Uttam Sugar Mills Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Uttam Sugar Mills' 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 satisfied.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While Uttam Sugar Mills may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.

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 capitalisation of ₹19b. That makes it extra important to check on its balance sheet strength.

Are Uttam Sugar Mills Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

First and foremost; there we saw no insiders sell Uttam Sugar Mills shares in the last year. 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. To be specific, they have ₹4.1b worth of shares. This considerable investment should help drive long-term value in the business. Those holdings account for over 21% of the company; visible skin in the game.

Should You Add Uttam Sugar Mills To Your Watchlist?

You can't deny that Uttam Sugar Mills has grown its earnings per share at a very impressive rate. That's attractive. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for Uttam Sugar Mills that you need to be mindful of.

The good news is that Uttam Sugar Mills is not the only growth stock with insider buying. Here's a list of them... 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.