With EPS Growth And More, Kirloskar Ferrous Industries (NSE:KIRLFER) Is Interesting

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. 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.

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

How Fast Is Kirloskar Ferrous Industries Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud Kirloskar Ferrous Industries's stratospheric annual EPS growth of 45%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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). Kirloskar Ferrous Industries's EBIT margins have actually improved by 4.4 percentage points in the last year, to reach 12%, but, on the flip side, revenue was down 22%. That falls short of ideal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Since Kirloskar Ferrous Industries is no giant, with a market capitalization of ₹13b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Kirloskar Ferrous Industries Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Kirloskar Ferrous Industries shares worth a considerable sum. Indeed, they hold ₹1.4b worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 11% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Kirloskar Ferrous Industries Deserve A Spot On Your Watchlist?

Kirloskar Ferrous Industries's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Kirloskar Ferrous Industries for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Kirloskar Ferrous Industries you should be aware of.

You can invest in 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.

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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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