Should You Be Adding Sreeleathers (NSE:SREEL) To Your Watchlist 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. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Sreeleathers (NSE:SREEL), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Sreeleathers

How Fast Is Sreeleathers Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Sreeleathers has grown EPS by 32% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. EBIT margins for Sreeleathers remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to ₹2.1b. That's a real positive.

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

Sreeleathers isn't a huge company, given its market capitalisation of ₹8.3b. That makes it extra important to check on its balance sheet strength.

Are Sreeleathers Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.

The good news for Sreeleathers shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Satyabrata Dey, the Founder of the company, paid ₹3.1m for shares at around ₹191 each. It seems that at least one insider is prepared to show the market there is potential within Sreeleathers.

On top of the insider buying, we can also see that Sreeleathers insiders own a large chunk of the company. In fact, they own 38% of the shares, making insiders a very influential shareholder group. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. To give you an idea, the value of insiders' holdings in the business are valued at ₹3.1b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Sreeleathers To Your Watchlist?

You can't deny that Sreeleathers has grown its earnings per share at a very impressive rate. That's attractive. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. What about risks? Every company has them, and we've spotted 3 warning signs for Sreeleathers (of which 2 shouldn't be ignored!) you should know about.

The good news is that Sreeleathers 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.

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.