With EPS Growth And More, NACL Industries (NSE:NACLIND) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like NACL Industries (NSE:NACLIND). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for NACL Industries

NACL Industries's Improving Profits

Over the last three years, NACL Industries has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a falcon taking flight, NACL Industries's EPS soared from ₹2.63 to ₹3.70, over the last year. That's a impressive gain of 41%.

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. NACL Industries maintained stable EBIT margins over the last year, all while growing revenue 38% to ₹16b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since NACL Industries is no giant, with a market capitalization of ₹16b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are NACL Industries Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own NACL Industries shares worth a considerable sum. To be specific, they have ₹2.3b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 14% of the company, demonstrating a degree of high-level alignment with shareholders.

Does NACL Industries Deserve A Spot On Your Watchlist?

You can't deny that NACL Industries has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. What about risks? Every company has them, and we've spotted 3 warning signs for NACL Industries (of which 2 are a bit unpleasant!) you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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.