Do Manaksia Aluminium's (NSE:MANAKALUCO) Earnings Warrant Your Attention?

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 currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Manaksia Aluminium (NSE:MANAKALUCO). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Manaksia Aluminium

How Quickly Is Manaksia Aluminium Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Manaksia Aluminium grew its EPS by 15% 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. While we note Manaksia Aluminium achieved similar EBIT margins to last year, revenue grew by a solid 6.9% to ₹4.7b. That's a real positive.

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 Manaksia Aluminium is no giant, with a market capitalisation of ₹1.6b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Manaksia Aluminium Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So those who are interested in Manaksia Aluminium will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 75% of the company, so their decisions have a significant impact on their investments. 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 Manaksia Aluminium being valued at ₹1.6b, this is a small company we're talking about. So this large proportion of shares owned by insiders only amounts to ₹1.2b. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

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 Manaksia Aluminium, the median CEO pay is around ₹3.3m.

The Manaksia Aluminium CEO received total compensation of only ₹23k 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 remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Should You Add Manaksia Aluminium To Your Watchlist?

As previously touched on, Manaksia Aluminium is a growing business, which is encouraging. Earnings growth might be the main attraction for Manaksia Aluminium, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. Still, you should learn about the 3 warning signs we've spotted with Manaksia Aluminium (including 1 which is a bit concerning).

Although Manaksia Aluminium certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.