Here's Why We Think Gujarat State Fertilizers & Chemicals (NSE:GSFC) Is Well Worth Watching

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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Gujarat State Fertilizers & Chemicals (NSE:GSFC). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.

See our latest analysis for Gujarat State Fertilizers & Chemicals

Gujarat State Fertilizers & Chemicals's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Gujarat State Fertilizers & Chemicals managed to grow EPS by 5.1% per year, over three years. While that sort of growth rate isn't amazing, it does show the business is growing.

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). This approach makes Gujarat State Fertilizers & Chemicals look pretty good, on balance; although revenue is flattish, EBIT margins improved from 1.4% to 6.4% in the last year. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of Gujarat State Fertilizers & Chemicals's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Gujarat State Fertilizers & Chemicals Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. I discovered that the median total compensation for the CEOs of companies like Gujarat State Fertilizers & Chemicals with market caps between ₹30b and ₹120b is about ₹29m.

The Gujarat State Fertilizers & Chemicals CEO received total compensation of only ₹1.3k in the year to . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is Gujarat State Fertilizers & Chemicals Worth Keeping An Eye On?

One positive for Gujarat State Fertilizers & Chemicals is that it is growing EPS. That's nice to see. Not only that, but the CEO is paid quite reasonably, which makes me feel more trusting of the board of directors. So all in all I think it's worth at least considering for your watchlist. It is worth noting though that we have found 1 warning sign for Gujarat State Fertilizers & Chemicals that you need to take into consideration.

Although Gujarat State Fertilizers & Chemicals certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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.

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.

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