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Should You Be Adding Globe Textiles (India) (NSE:GLOBE) To Your Watchlist Today?

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. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Globe Textiles (India) (NSE:GLOBE), which has not only revenues, but also profits. While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.

View 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Globe Textiles (India) managed to grow EPS by 16% per year, over three years. That’s a good rate of growth, if it can be sustained.

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. Globe Textiles (India) maintained stable EBIT margins over the last year, all while growing revenue 39% to ₹4.3b. That’s progress.

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.

NSEI:GLOBE Earnings and Revenue History August 4th 2022

Globe Textiles (India) isn’t a huge company, given its market capitalisation of ₹1.3b. 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 we’re pleased to report that Globe Textiles (India) insiders own a meaningful share of the business. Indeed, with a collective holding of 57%, 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. Of course, Globe Textiles (India) is a very small company, with a market cap of only ₹1.3b. So despite a large proportional holding, insiders only have ₹722m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

It’s good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations under ₹16b, like Globe Textiles (India), the median CEO pay is around ₹3.0m.

Globe Textiles (India)’s CEO only received compensation totalling ₹485k in the year to March 2021. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. While the level of CEO compensation shouldn’t be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

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

One positive for Globe Textiles (India) is that it is growing EPS. That’s nice to see. Earnings growth might be the main attraction for Globe Textiles (India), but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you’d argue this one is worthy of the watchlist, at least. We don’t want to rain on the parade too much, but we did also find 4 warning signs for Globe Textiles (India) (2 can’t be ignored!) that you need to be mindful of.

Although Globe Textiles (India) certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.

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

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.

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