With EPS Growth And More, Jainam Ferro Alloys (I) (NSE:JAINAM) 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Jainam Ferro Alloys (I) (NSE:JAINAM). 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 Jainam Ferro Alloys (I)

Jainam Ferro Alloys (I)'s Improving Profits

Jainam Ferro Alloys (I) has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Jainam Ferro Alloys (I)'s EPS catapulted from ₹15.91 to ₹31.57, over the last year. Year on year growth of 98% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

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. While Jainam Ferro Alloys (I) did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Since Jainam Ferro Alloys (I) is no giant, with a market capitalisation of ₹1.7b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Jainam Ferro Alloys (I) 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 we're pleased to report that Jainam Ferro Alloys (I) insiders own a meaningful share of the business. Indeed, with a collective holding of 75%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Although, with Jainam Ferro Alloys (I) being valued at ₹1.7b, this is a small company we're talking about. That means insiders only have ₹1.2b worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations under ₹16b, like Jainam Ferro Alloys (I), the median CEO pay is around ₹3.6m.

Jainam Ferro Alloys (I)'s CEO only received compensation totalling ₹3.0m in the year to March 2022. 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.

Does Jainam Ferro Alloys (I) Deserve A Spot On Your Watchlist?

Jainam Ferro Alloys (I)'s earnings per share have been soaring, with growth rates sky high. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so the writing on the wall tells us that Jainam Ferro Alloys (I) is worth considering carefully. It is worth noting though that we have found 3 warning signs for Jainam Ferro Alloys (I) (2 make us uncomfortable!) that you need to take into consideration.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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. 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.