With EPS Growth And More, Texmo Pipes and Products (NSE:TEXMOPIPES) Is Interesting

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Texmo Pipes and Products (NSE:TEXMOPIPES). 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 Texmo Pipes and Products

Texmo Pipes and Products's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Like the last firework on New Year's Eve accelerating into the sky, Texmo Pipes and Products's EPS shot from ₹0.98 to ₹1.93, over the last year. Year on year growth of 97% is certainly a sight to behold.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While Texmo Pipes and Products may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.

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.

Texmo Pipes and Products isn't a huge company, given its market capitalization of ₹648m. That makes it extra important to check on its balance sheet strength.

Are Texmo Pipes and Products Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.

It's good to see Texmo Pipes and Products insiders walking the walk, by spending ₹40m on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. Zooming in, we can see that the biggest insider purchase was by MD & Executive Non Independent Director Sanjay Agrawal for ₹22m worth of shares, at about ₹13.90 per share.

On top of the insider buying, we can also see that Texmo Pipes and Products insiders own a large chunk of the company. Actually, with 41% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only ₹648m Texmo Pipes and Products is really small for a listed company. That means insiders only have ₹266m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Mohit Agrawal is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations under ₹15b, like Texmo Pipes and Products, the median CEO pay is around ₹3.3m.

The CEO of Texmo Pipes and Products was paid just ₹1.6m in total compensation for the year ending . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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 good governance, more generally.

Is Texmo Pipes and Products Worth Keeping An Eye On?

Texmo Pipes and Products's earnings per share have taken off like a rocket aimed right at the moon. Just as heartening; insiders both own and are buying more stock. Because of the potential that it has reached an inflection point, I'd suggest Texmo Pipes and Products belongs on the top of your watchlist. You still need to take note of risks, for example - Texmo Pipes and Products has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

The good news is that Texmo Pipes and Products is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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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