Here's Why I Think Maharashtra Seamless (NSE:MAHSEAMLES) Is An Interesting Stock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.

In contrast to all that, I prefer to spend time on companies like Maharashtra Seamless (NSE:MAHSEAMLES), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Maharashtra Seamless

Maharashtra Seamless's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Impressively, Maharashtra Seamless has grown EPS by 18% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. On the one hand, Maharashtra Seamless's EBIT margins fell over the last year, but on the other hand, revenue grew. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

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

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Maharashtra Seamless's balance sheet strength, before getting too excited.

Are Maharashtra Seamless Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

One shining light for Maharashtra Seamless is the serious outlay one insider has made to buy shares, in the last year. Specifically, in one large transaction Non-Executive Chairman Dharam Jindal paid ₹57m, for stock at ₹499 per share. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.

The good news, alongside the insider buying, for Maharashtra Seamless bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold ₹3.6b worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 8.6% of the company; visible skin in the game.

Does Maharashtra Seamless Deserve A Spot On Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Maharashtra Seamless's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for Maharashtra Seamless that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Maharashtra Seamless, 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. 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.