With EPS Growth And More, Ramkrishna Forgings (NSE:RKFORGE) Makes An Interesting Case

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Ramkrishna Forgings (NSE:RKFORGE), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Ramkrishna Forgings

How Quickly Is Ramkrishna Forgings Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Ramkrishna Forgings' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 60%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Ramkrishna Forgings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 20% to ₹41b. That's a real positive.

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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Ramkrishna Forgings?

Are Ramkrishna Forgings Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, 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.

The good news for Ramkrishna Forgings shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Naresh Jalan, the MD & Executive Director of the company, paid ₹4.2m for shares at around ₹725 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Ramkrishna Forgings.

Along with the insider buying, another encouraging sign for Ramkrishna Forgings is that insiders, as a group, have a considerable shareholding. Indeed, they have a considerable amount of wealth invested in it, currently valued at ₹23b. Coming in at 13% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

Should You Add Ramkrishna Forgings To Your Watchlist?

Ramkrishna Forgings' earnings per share growth have been climbing higher at an appreciable rate. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Ramkrishna Forgings belongs near the top of your watchlist. However, before you get too excited we've discovered 1 warning sign for Ramkrishna Forgings that you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Ramkrishna Forgings isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by high insider ownership.

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.