Does Indian Metals and Ferro Alloys (NSE:IMFA) Deserve A Spot On Your Watchlist?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Indian Metals and Ferro Alloys (NSE:IMFA), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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How Quickly Is Indian Metals and Ferro Alloys Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Indian Metals and Ferro Alloys has achieved impressive annual EPS growth of 38%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. The music to the ears of Indian Metals and Ferro Alloys shareholders is that EBIT margins have grown from 17% to 21% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

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.

See our latest analysis for Indian Metals and Ferro Alloys

Fortunately, we've got access to analyst forecasts of Indian Metals and Ferro Alloys' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Indian Metals and Ferro Alloys Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Indian Metals and Ferro Alloys insiders own a meaningful share of the business. Indeed, with a collective holding of 58%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. At the current share price, that insider holding is worth a staggering ₹34b. That level of investment from insiders is nothing to sneeze at.

Is Indian Metals and Ferro Alloys Worth Keeping An Eye On?

Indian Metals and Ferro Alloys' earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Indian Metals and Ferro Alloys very closely. What about risks? Every company has them, and we've spotted 1 warning sign for Indian Metals and Ferro Alloys you should know about.

Although Indian Metals and Ferro Alloys certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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

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