With EPS Growth And More, Gujarat State Fertilizers & Chemicals (NSE:GSFC) Makes An Interesting Case

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. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Gujarat State Fertilizers & Chemicals (NSE:GSFC). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Gujarat State Fertilizers & Chemicals

How Fast Is Gujarat State Fertilizers & Chemicals Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Impressively, Gujarat State Fertilizers & Chemicals has grown EPS by 22% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Gujarat State Fertilizers & Chemicals shareholders can take confidence from the fact that EBIT margins are up from 5.9% to 13%, 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. Click on the chart to see the exact numbers.

While profitability drives the upside, prudent investors always check the balance sheet, too.

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

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. The median total compensation for CEOs of companies similar in size to Gujarat State Fertilizers & Chemicals, with market caps between ₹31b and ₹125b, is around ₹27m.

The Gujarat State Fertilizers & Chemicals CEO received total compensation of only ₹1.3k in the year to March 2021. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

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

For growth investors, Gujarat State Fertilizers & Chemicals' raw rate of earnings growth is a beacon in the night. The fast growth bodes well while the very reasonable CEO pay assists builds some confidence in the board. Based on these factors, this stock may well deserve a spot on your watchlist, or even a little further research. We should say that we've discovered 3 warning signs for Gujarat State Fertilizers & Chemicals (1 is potentially serious!) that you should be aware of before investing here.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.