Does Uflex (NSE:UFLEX) Deserve A Spot On Your Watchlist?

By
Simply Wall St
Published
March 22, 2022
NSEI:UFLEX
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like Uflex (NSE:UFLEX), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.

View our latest analysis for Uflex

Uflex's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. I, for one, am blown away by the fact that Uflex has grown EPS by 48% 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.

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. Uflex maintained stable EBIT margins over the last year, all while growing revenue 46% to ₹116b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NSEI:UFLEX Earnings and Revenue History March 22nd 2022

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Uflex 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. So it is good to see that Uflex insiders have a significant amount of capital invested in the stock. With a whopping ₹6.3b worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 14% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Should You Add Uflex To Your Watchlist?

Uflex's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Uflex for a spot on your watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Uflex you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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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