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

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Fast Is Usha Martin Growing Its Earnings Per Share?

Over the last three years, Usha Martin has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Usha Martin's EPS has risen over the last 12 months, growing from ₹11.06 to ₹13.10. There's little doubt shareholders would be happy with that 18% gain.

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. Usha Martin shareholders can take confidence from the fact that EBIT margins are up from 13% to 16%, and revenue is growing. That's great to see, on both counts.

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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Usha Martin's balance sheet strength, before getting too excited.

Are Usha Martin Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While we did see insider selling of Usha Martin stock in the last year, one single insider spent plenty more buying. Specifically the MD & Executive Director, Rajeev Jhawar, spent ₹35m, paying about ₹352 per share. That can definitely be seen as a sign of conviction.

Along with the insider buying, another encouraging sign for Usha Martin is that insiders, as a group, have a considerable shareholding. To be specific, they have ₹4.0b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 4.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Rajeev Jhawar is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Usha Martin, with market caps between ₹33b and ₹133b, is around ₹32m.

Usha Martin offered total compensation worth ₹22m to its CEO in the year to March 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Should You Add Usha Martin To Your Watchlist?

One positive for Usha Martin is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Still, you should learn about the 1 warning sign we've spotted with Usha Martin.

Keen growth investors love to see insider buying. Thankfully, Usha Martin isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.