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Does Jindal Saw (NSE:JINDALSAW) Deserve A Spot On Your Watchlist?

Simply Wall St

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Jindal Saw (NSE:JINDALSAW). While profit is not necessarily a social good, it's easy to admire a business than 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 Jindal Saw

How Fast Is Jindal Saw Growing Its Earnings Per Share?

Over the last three years, Jindal Saw has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Jindal Saw's EPS shot from ₹11.16 to ₹28.17, over the last year. You don't see 152% year-on-year growth like that, very often.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Jindal Saw's EBIT margins were flat over the last year, revenue grew by a solid 32% to ₹124b. 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.

NSEI:JINDALSAW Income Statement, August 17th 2019

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

Are Jindal Saw Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Jindal Saw insiders have a significant amount of capital invested in the stock. Indeed, they hold ₹865m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 3.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Jindal Saw Deserve A Spot On Your Watchlist?

Jindal Saw's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Jindal Saw for a spot on your watchlist. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Jindal Saw.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.