If You Like EPS Growth Then Check Out Tamilnadu Petroproducts (NSE:TNPETRO) Before It's Too Late

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Tamilnadu Petroproducts (NSE:TNPETRO). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Tamilnadu Petroproducts

Tamilnadu Petroproducts's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Tamilnadu Petroproducts has grown EPS by 56% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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. The good news is that Tamilnadu Petroproducts is growing revenues, and EBIT margins improved by 7.8 percentage points to 15%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Tamilnadu Petroproducts is no giant, with a market capitalization of ₹11b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Tamilnadu Petroproducts Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Tamilnadu Petroproducts shares worth a considerable sum. To be specific, they have ₹1.7b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 16% of the company; visible skin in the game.

Does Tamilnadu Petroproducts Deserve A Spot On Your Watchlist?

Tamilnadu Petroproducts's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Tamilnadu Petroproducts for a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Tamilnadu Petroproducts that you should be aware of.

Although Tamilnadu Petroproducts 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.