We Ran A Stock Scan For Earnings Growth And Gandhi Special Tubes (NSE:GANDHITUBE) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Gandhi Special Tubes (NSE:GANDHITUBE). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Gandhi Special Tubes

How Fast Is Gandhi Special Tubes Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Gandhi Special Tubes' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 44%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. The music to the ears of Gandhi Special Tubes shareholders is that EBIT margins have grown from 33% to 36% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Gandhi Special Tubes is no giant, with a market capitalisation of ₹8.4b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Gandhi Special Tubes Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Gandhi Special Tubes insiders own a significant number of shares certainly is appealing. In fact, they own 68% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. To give you an idea, the value of insiders' holdings in the business are valued at ₹5.7b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Gandhi Special Tubes To Your Watchlist?

Gandhi Special Tubes' earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Gandhi Special Tubes for a spot on your watchlist. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Gandhi Special Tubes is trading on a high P/E or a low P/E, relative to its industry.

Although Gandhi Special Tubes certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.

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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.