Is Now The Time To Put NCL Industries (NSE:NCLIND) On Your Watchlist?

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. 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.

So if you're like me, you might be more interested in profitable, growing companies, like NCL Industries (NSE:NCLIND). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for NCL Industries

How Fast Is NCL Industries Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, NCL Industries has grown EPS by 23% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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 good news is that NCL Industries is growing revenues, and EBIT margins improved by 2.5 percentage points to 16%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Since NCL Industries is no giant, with a market capitalization of ₹7.6b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are NCL Industries Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We do note that, in the last year, insiders sold -₹582k worth of shares. But that's far less than the ₹105m insiders spend purchasing stock. This makes me even more interested in NCL Industries because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Non-Executive Director Ashven Datla who made the biggest single purchase, worth ₹14m, paying ₹103 per share.

On top of the insider buying, we can also see that NCL Industries insiders own a large chunk of the company. Actually, with 49% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have ₹3.7b invested in the business, using the current share price. That's nothing to sneeze at!

Is NCL Industries Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about NCL Industries's strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for NCL Industries that you should be aware of.

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