Here's Why We Think Usha Martin (NSE:USHAMART) Might Deserve Your Attention Today

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Usha Martin (NSE:USHAMART), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Usha Martin with the means to add long-term value to shareholders.

See our latest analysis for Usha Martin

How Quickly Is Usha Martin Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Usha Martin has managed to grow EPS by 17% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. EBIT margins for Usha Martin remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 27% to ₹31b. That's encouraging news for the company!

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.

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

Are Usha Martin Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We note that Usha Martin insiders spent ₹8.6m on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future. It is also worth noting that it was company insider Stuti Agarwalla who made the biggest single purchase, worth ₹6.8m, paying ₹136 per share.

The good news, alongside the insider buying, for Usha Martin bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have ₹2.4b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 4.3% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary 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, Rajeev Jhawar is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations between ₹33b and ₹132b, like Usha Martin, the median CEO pay is around ₹36m.

The CEO of Usha Martin only received ₹12m in total compensation for the year ending March 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Usha Martin Deserve A Spot On Your Watchlist?

For growth investors, Usha Martin's raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. These things considered, this is one stock worth watching. It is worth noting though that we have found 2 warning signs for Usha Martin that you need to take into consideration.

The good news is that Usha Martin 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. 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.