Do Bharat Wire Ropes' (NSE:BHARATWIRE) Earnings Warrant Your Attention?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Bharat Wire Ropes (NSE:BHARATWIRE). 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 Bharat Wire Ropes

Bharat Wire Ropes' Improving Profits

In the last three years Bharat Wire Ropes' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Bharat Wire Ropes' EPS shot up from ₹5.86 to ₹8.39; a result that's bound to keep shareholders happy. That's a impressive gain of 43%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Bharat Wire Ropes shareholders can take confidence from the fact that EBIT margins are up from 7.8% to 17%, and revenue is growing. 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.

Bharat Wire Ropes isn't a huge company, given its market capitalisation of ₹6.7b. That makes it extra important to check on its balance sheet strength.

Are Bharat Wire Ropes Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Bharat Wire Ropes followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold ₹2.0b worth of its stock. This considerable investment should help drive long-term value in the business. That amounts to 30% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Bharat Wire Ropes To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Bharat Wire Ropes' strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Still, you should learn about the 4 warning signs we've spotted with Bharat Wire Ropes (including 1 which is significant).

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.