Here's Why I Think Texmo Pipes and Products (NSE:TEXMOPIPES) Is An Interesting Stock

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

So if you're like me, you might be more interested in profitable, growing companies, like Texmo Pipes and Products (NSE:TEXMOPIPES). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 Texmo Pipes and Products

Texmo Pipes and Products's Improving Profits

In the last three years Texmo Pipes and Products's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Texmo Pipes and Products's EPS shot from ₹2.48 to ₹5.72, over the last year. You don't see 130% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.

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. While we note Texmo Pipes and Products's EBIT margins were flat over the last year, revenue grew by a solid 44% to ₹5.2b. That's progress.

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

Since Texmo Pipes and Products is no giant, with a market capitalization of ₹1.9b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Texmo Pipes and Products Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Texmo Pipes and Products insiders own a meaningful share of the business. In fact, they own 37% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Of course, Texmo Pipes and Products is a very small company, with a market cap of only ₹1.9b. So despite a large proportional holding, insiders only have ₹712m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations under ₹15b, like Texmo Pipes and Products, the median CEO pay is around ₹3.0m.

The CEO of Texmo Pipes and Products was paid just ₹1.6m in total compensation for the year ending . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Texmo Pipes and Products To Your Watchlist?

Texmo Pipes and Products's earnings per share have taken off like a rocket aimed right at the moon. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The strong EPS improvement suggests the businesses is humming along. Big growth can make big winners, so I do think Texmo Pipes and Products is worth considering carefully. Still, you should learn about the 2 warning signs we've spotted with Texmo Pipes and Products .

Although Texmo Pipes and Products certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.