Should You Be Adding Varroc Engineering (NSE:VARROC) To Your Watchlist Today?

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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Varroc Engineering (NSE:VARROC). 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.

See our latest analysis for Varroc Engineering

How Fast Is Varroc Engineering Growing Its Earnings Per Share?

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that Varroc Engineering's EPS went from ₹6.14 to ₹34.44 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Varroc Engineering remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 9.0% to ₹77b. That's encouraging news for the company!

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

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Varroc Engineering's future EPS 100% free.

Are Varroc Engineering Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that Varroc Engineering insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 68% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. This is an incredible endorsement from them.

Is Varroc Engineering Worth Keeping An Eye On?

Varroc Engineering's 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. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Varroc Engineering for a spot on your watchlist. You still need to take note of risks, for example - Varroc Engineering has 1 warning sign we think you should be aware of.

Although Varroc Engineering 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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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.