Does Tainwala Chemicals and Plastics (India) (NSE:TAINWALCHM) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Tainwala Chemicals and Plastics (India) (NSE:TAINWALCHM), 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.

View our latest analysis for Tainwala Chemicals and Plastics (India)

Tainwala Chemicals and Plastics (India)'s Earnings Per Share Are 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) outcomes. That makes EPS growth an attractive quality for any company. We can see that in the last three years Tainwala Chemicals and Plastics (India) grew its EPS by 8.2% per year. That's a good rate of growth, if it can be sustained.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Tainwala Chemicals and Plastics (India) maintained stable EBIT margins over the last year, all while growing revenue 123% to ₹175m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Tainwala Chemicals and Plastics (India) isn't a huge company, given its market capitalisation of ₹1.3b. That makes it extra important to check on its balance sheet strength.

Are Tainwala Chemicals and Plastics (India) Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Any way you look at it Tainwala Chemicals and Plastics (India) shareholders can gain quiet confidence from the fact that insiders shelled out ₹18m to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. It is also worth noting that it was Additional Executive Director Ayush Tainwala who made the biggest single purchase, worth ₹8.7m, paying ₹96.30 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Tainwala Chemicals and Plastics (India) insiders own more than a third of the company. In fact, they own 54% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only ₹1.3b Tainwala Chemicals and Plastics (India) is really small for a listed company. So despite a large proportional holding, insiders only have ₹702m worth of stock. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Does Tainwala Chemicals and Plastics (India) Deserve A Spot On Your Watchlist?

As previously touched on, Tainwala Chemicals and Plastics (India) is a growing business, which is encouraging. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. It is worth noting though that we have found 4 warning signs for Tainwala Chemicals and Plastics (India) (1 is potentially serious!) that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, Tainwala Chemicals and Plastics (India) 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. 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.