Do Silver Touch Technologies' (NSE:SILVERTUC) Earnings Warrant Your Attention?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Silver Touch Technologies (NSE:SILVERTUC). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Quickly Is Silver Touch Technologies Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, Silver Touch Technologies has achieved impressive annual EPS growth of 47%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Silver Touch Technologies maintained stable EBIT margins over the last year, all while growing revenue 49% to ₹2.8b. That's progress.

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.

See our latest analysis for Silver Touch Technologies

Since Silver Touch Technologies is no giant, with a market capitalisation of ₹8.8b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Silver Touch Technologies 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.

Silver Touch Technologies top brass are certainly in sync, not having sold any shares, over the last year. But more importantly, Chairman & MD Vipul Thakkar spent ₹7.4m acquiring shares, doing so at an average price of ₹675. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

On top of the insider buying, we can also see that Silver Touch Technologies insiders own a large chunk of the company. To be exact, company insiders hold 81% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. To give you an idea, the value of insiders' holdings in the business are valued at ₹7.1b at the current share price. So there's plenty there to keep them focused!

Should You Add Silver Touch Technologies To Your Watchlist?

Silver Touch Technologies' earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Silver Touch Technologies deserves timely attention. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Silver Touch Technologies is trading on a high P/E or a low P/E, relative to its industry.

Keen growth investors love to see insider activity. Thankfully, Silver Touch Technologies isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by high insider ownership.

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.