Is Now The Time To Put JK Lakshmi Cement (NSE:JKLAKSHMI) On Your Watchlist?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like JK Lakshmi Cement (NSE:JKLAKSHMI). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for JK Lakshmi Cement

JK Lakshmi Cement's Improving Profits

Over the last three years, JK Lakshmi Cement 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 firecracker arcing through the night sky, JK Lakshmi Cement's EPS shot from ₹16.20 to ₹29.89, over the last year. Year on year growth of 85% is certainly a sight to behold.

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 revenue is looking a bit flat, the good news is EBIT margins improved by 3.0 percentage points to 14%, in the last twelve months. That's something to smile about.

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

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for JK Lakshmi Cement.

Are JK Lakshmi Cement Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.

The good news is that JK Lakshmi Cement insiders spent a whopping ₹72m on stock in just one year, and I didn't see any selling. And so I find myself almost expectant, and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the Non-Independent & Non-Executive Director, Raghupati Singhania, who made the biggest single acquisition, paying ₹24m for shares at about ₹250 each.

The good news, alongside the insider buying, for JK Lakshmi Cement bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have ₹2.0b worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 4.2% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does JK Lakshmi Cement Deserve A Spot On Your Watchlist?

JK Lakshmi Cement's earnings per share have taken off like a rocket aimed right at the moon. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe JK Lakshmi Cement deserves timely attention. It is worth noting though that we have found 2 warning signs for JK Lakshmi Cement that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of JK Lakshmi Cement, you'll probably love this free list of growing companies that insiders are buying.

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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