Here's Why I Think Supreme Industries (NSE:SUPREMEIND) Might Deserve Your Attention Today

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 completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Supreme Industries (NSE:SUPREMEIND). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Supreme Industries

How Quickly Is Supreme Industries Increasing Earnings Per Share?

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). That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Supreme Industries's EPS has grown 30% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Supreme Industries is growing revenues, and EBIT margins improved by 3.9 percentage points to 17%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Supreme Industries.

Are Supreme 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news for Supreme Industries shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that A. Tripathi, the Executive Vice President of Plastic Piping system of the company, paid ₹2.5m for shares at around ₹1,970 each.

On top of the insider buying, it's good to see that Supreme Industries insiders have a valuable investment in the business. Indeed, they have a glittering mountain of wealth invested in it, currently valued at ₹8.1b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Is Supreme Industries Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Supreme Industries's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. However, before you get too excited we've discovered 1 warning sign for Supreme 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 Supreme 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.

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.

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