Should You Be Adding M M Forgings (NSE:MMFL) To Your Watchlist Today?

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. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 M M Forgings (NSE:MMFL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide M M Forgings with the means to add long-term value to shareholders.

See our latest analysis for M M Forgings

How Fast Is M M Forgings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, M M Forgings has grown EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The music to the ears of M M Forgings shareholders is that EBIT margins have grown from 8.5% to 12% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Since M M Forgings is no giant, with a market capitalisation of ₹23b, you should definitely check its cash and debt before getting too excited about its prospects.

Are M M Forgings Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that M M Forgings insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at ₹7.3b, they have plenty of motivation to push the business to succeed. That holding amounts to 31% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.

Does M M Forgings Deserve A Spot On Your Watchlist?

As previously touched on, M M Forgings is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. However, before you get too excited we've discovered 2 warning signs for M M Forgings that you should be aware of.

The beauty of investing is that you can invest in almost 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. 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.