Is Now The Time To Put Globe Textiles (India) (NSE:GLOBE) On Your Watchlist?

It’s common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. 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.

If this kind of company isn’t your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Globe Textiles (India) (NSE:GLOBE). 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.

Check out our latest analysis for Globe Textiles (India)

How Quickly Is Globe Textiles (India) Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Globe Textiles (India) has grown EPS by 19% per year, compound, in the last three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be beaming.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it’s a great way for a company to maintain a competitive advantage in the market. EBIT margins for Globe Textiles (India) remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 36% to ₹4.5b. That’s a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Globe Textiles (India) isn’t a huge company, given its market capitalisation of ₹642m. That makes it extra important to check on its balance sheet strength.

Are Globe Textiles (India) 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 as you can imagine, the fact that Globe Textiles (India) insiders own a significant number of shares certainly is appealing. Actually, with 36% of the company to their names, insiders are profoundly invested in the business. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. Although, with Globe Textiles (India) being valued at ₹642m, this is a small company we’re talking about. So this large proportion of shares owned by insiders only amounts to ₹230m. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Globe Textiles (India) To Your Watchlist?

You can’t deny that Globe Textiles (India) has grown its earnings per share at a very impressive rate. That’s attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Globe Textiles (India)’s continuing strength. The growth and insider confidence is looked upon well and so it’s worthwhile to investigate further with a view to discern the stock’s true value. Before you take the next step you should know about the 3 warning signs for Globe Textiles (India) (2 make us uncomfortable!) that we have uncovered.

There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.