I Built A List Of Growing Companies And N R Agarwal Industries (NSE:NRAIL) Made The Cut

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like N R Agarwal Industries (NSE:NRAIL). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for N R Agarwal Industries

How Fast Is N R Agarwal Industries Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. N R Agarwal Industries managed to grow EPS by 6.6% per year, over three years. While that sort of growth rate isn't amazing, it does show the business is growing.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Unfortunately, N R Agarwal Industries's revenue dropped 15% last year, but the silver lining is that EBIT margins improved from 11% to 14%. That's not ideal.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

N R Agarwal Industries isn't a huge company, given its market capitalization of ₹3.8b. That makes it extra important to check on its balance sheet strength.

Are N R Agarwal Industries Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We haven't seen any insiders selling N R Agarwal Industries shares, in the last year. With that in mind, it's heartening that Rajendra Agarwal, the Chairman of the company, paid ₹1.5m for shares at around ₹151 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since N R Agarwal Industries insiders own more than a third of the company. Indeed, with a collective holding of 75%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have ₹2.9b invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add N R Agarwal Industries To Your Watchlist?

As I already mentioned, N R Agarwal Industries is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for N R Agarwal Industries that you should be aware of.

As a growth investor I do like to see insider buying. But N R Agarwal Industries 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. 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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