Should You Be Adding Geekay Wires (NSE:GEEKAYWIRE) To Your Watchlist Today?

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In contrast to all that, I prefer to spend time on companies like Geekay Wires (NSE:GEEKAYWIRE), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Geekay Wires

How Fast Is Geekay Wires Growing Its Earnings Per Share?

Over the last three years, Geekay Wires has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Geekay Wires's EPS soared from ₹4.98 to ₹7.37, in just one year. That's a impressive gain of 48%.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While Geekay Wires may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of 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.

Geekay Wires isn't a huge company, given its market capitalization of ₹955m. That makes it extra important to check on its balance sheet strength.

Are Geekay Wires Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While Geekay Wires insiders did net -₹737k selling stock over the last year, they invested ₹20m, a much higher figure. On balance, to me, this signals their optimism. It is also worth noting that it was Renu Kandoi who made the biggest single purchase, worth ₹779k, paying ₹79.39 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Geekay Wires insiders own more than a third of the company. In fact, they own 46% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only ₹955m Geekay Wires is really small for a listed company. So despite a large proportional holding, insiders only have ₹436m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Ghanshyam Dass, is paid less than the median for similar sized companies. For companies with market capitalizations under ₹15b, like Geekay Wires, the median CEO pay is around ₹3.0m.

The CEO of Geekay Wires was paid just ₹1.3m in total compensation for the year ending . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does Geekay Wires Deserve A Spot On Your Watchlist?

You can't deny that Geekay Wires has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. So I do think this is one stock worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Geekay Wires (at least 1 which is a bit unpleasant) , and understanding these should be part of your investment process.

As a growth investor I do like to see insider buying. But Geekay Wires isn't the only one. You can see a 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. 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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