Here's Why We Think Manaksia Aluminium (NSE:MANAKALUCO) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like 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.

View our latest analysis for Manaksia Aluminium

Manaksia Aluminium's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Manaksia Aluminium managed to grow EPS by 14% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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 51% to ₹5.0b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Since Manaksia Aluminium is no giant, with a market capitalisation of ₹1.4b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Manaksia Aluminium Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

With strong conviction, Manaksia Aluminium insiders have stood united by refusing to sell shares over the last year. But more importantly, company insider Kanta Agrawal spent ₹14m acquiring shares, doing so at an average price of ₹24.69. Strong buying like that could be a sign of opportunity.

On top of the insider buying, we can also see that Manaksia Aluminium insiders own a large chunk of the company. In fact, they own 75% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Valued at only ₹1.4b Manaksia Aluminium is really small for a listed company. So this large proportion of shares owned by insiders only amounts to ₹1.1b. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Should You Add Manaksia Aluminium To Your Watchlist?

As previously touched on, Manaksia Aluminium is a growing business, which is encouraging. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. What about risks? Every company has them, and we've spotted 3 warning signs for Manaksia Aluminium (of which 1 can't be ignored!) you should know about.

Keen growth investors love to see insider buying. Thankfully, Manaksia Aluminium isn't the only one. You can see a a free list of them here.

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.