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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 completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Gallantt Ispat (NSE:GALLISPAT). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
View our latest analysis for Gallantt Ispat
How Quickly Is Gallantt Ispat Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Gallantt Ispat has grown EPS by 51% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for 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. While we note Gallantt Ispat's EBIT margins were flat over the last year, revenue grew by a solid 114% to ₹12b. 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.
Gallantt Ispat isn't a huge company, given its market capitalization of ₹8.7b. That makes it extra important to check on its balance sheet strength.
Are Gallantt Ispat Insiders Aligned With All Shareholders?
Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Gallantt Ispat insiders own a significant number of shares certainly appeals to me. Actually, with 36% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have ₹3.1b invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!