Does Bhagyanagar India (NSE:BHAGYANGR) 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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

In contrast to all that, many investors prefer to focus on companies like Bhagyanagar India (NSE:BHAGYANGR), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Bhagyanagar India

How Quickly Is Bhagyanagar India 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. Shareholders will be happy to know that Bhagyanagar India's EPS has grown 20% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. While we note Bhagyanagar India achieved similar EBIT margins to last year, revenue grew by a solid 61% to ₹17b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Bhagyanagar India isn't a huge company, given its market capitalisation of ₹1.5b. That makes it extra important to check on its balance sheet strength.

Are Bhagyanagar India 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 Bhagyanagar India insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 61%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Of course, Bhagyanagar India is a very small company, with a market cap of only ₹1.5b. So this large proportion of shares owned by insiders only amounts to ₹898m. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Should You Add Bhagyanagar India To Your Watchlist?

You can't deny that Bhagyanagar India has grown its earnings per share at a very impressive rate. That's attractive. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. We don't want to rain on the parade too much, but we did also find 2 warning signs for Bhagyanagar India (1 is a bit concerning!) that you need to be mindful of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.