With EPS Growth And More, Kirloskar Industries (NSE:KIRLOSIND) 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.

So if you're like me, you might be more interested in profitable, growing companies, like Kirloskar Industries (NSE:KIRLOSIND). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

Check out our latest analysis for Kirloskar Industries

How Fast Is Kirloskar Industries Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. Over the last three years, Kirloskar Industries has grown EPS by 13% per year. That's a good rate of growth, if it can be sustained.

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. Not all of Kirloskar Industries's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Unfortunately, Kirloskar Industries's revenue dropped 22% last year, but the silver lining is that EBIT margins improved from 9.1% to 14%. That falls short of ideal.

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

Since Kirloskar Industries is no giant, with a market capitalization of ₹7.0b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Kirloskar Industries 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 as you can imagine, the fact that Kirloskar Industries insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 73%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have ₹5.1b invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Is Kirloskar Industries Worth Keeping An Eye On?

As I already mentioned, Kirloskar Industries is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. However, before you get too excited we've discovered 2 warning signs for Kirloskar Industries that you should be aware of.

Although Kirloskar Industries 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.

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