Does Thangamayil Jewellery (NSE:THANGAMAYL) Deserve A Spot On Your Watchlist?

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. 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.

So if you're like me, you might be more interested in profitable, growing companies, like Thangamayil Jewellery (NSE:THANGAMAYL). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Thangamayil Jewellery

Thangamayil Jewellery'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. 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 Thangamayil Jewellery has grown EPS by 50% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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. Thangamayil Jewellery's EBIT margins have actually improved by 3.5 percentage points in the last year, to reach 8.8%, but, on the flip side, revenue was down 20%. That's not ideal.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Thangamayil Jewellery isn't a huge company, given its market capitalization of ₹7.4b. That makes it extra important to check on its balance sheet strength.

Are Thangamayil Jewellery Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's a pleasure to note that insiders spent ₹101m buying Thangamayil Jewellery shares, over the last year, without reporting any share sales whatsoever. As if for a flower bud approaching bloom, I become an expectant observer, anticipating with hope, that something splendid is coming. We also note that it was the Joint MD & Whole-Time Director, N. Kumar, who made the biggest single acquisition, paying ₹11m for shares at about ₹339 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Thangamayil Jewellery insiders own more than a third of the company. In fact, they own 65% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about ₹4.8b riding on the stock, at current prices. That's nothing to sneeze at!

Does Thangamayil Jewellery Deserve A Spot On Your Watchlist?

Thangamayil Jewellery's earnings have taken off like any random crypto-currency did, back in 2017. What's more insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Thangamayil Jewellery deserves timely attention. Still, you should learn about the 4 warning signs we've spotted with Thangamayil Jewellery (including 2 which are significant) .

The good news is that Thangamayil Jewellery 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. 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.
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