I Ran A Stock Scan For Earnings Growth And Gravita India (NSE:GRAVITA) Passed With Ease

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Gravita India (NSE:GRAVITA). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Gravita India

Gravita India's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. Gravita India managed to grow EPS by 6.3% per year, over three years. While that sort of growth rate isn't amazing, it does show the business is growing.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Gravita India's EBIT margins were flat over the last year, revenue grew by a solid 4.6% to ₹14b. That's a real positive.

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.

Gravita India isn't a huge company, given its market capitalization of ₹7.0b. That makes it extra important to check on its balance sheet strength.

Are Gravita India Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.

One positive for Gravita India, is that company insiders paid ₹2.8m for shares in the last year. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. We also note that it was the , Krishan Gupta, who made the biggest single acquisition, paying ₹1.7m for shares at about ₹49.55 each.

On top of the insider buying, we can also see that Gravita India insiders own a large chunk of the company. Indeed, with a collective holding of 82%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have ₹5.7b invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Does Gravita India Deserve A Spot On Your Watchlist?

As I already mentioned, Gravita India is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Gravita India , and understanding them should be part of your investment process.

The good news is that Gravita India 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. 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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