Here's Why We Think Shera Energy (NSE:SHERA) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Shera Energy (NSE:SHERA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shera Energy with the means to add long-term value to shareholders.

Check out our latest analysis for Shera Energy

Shera Energy's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Shera Energy has grown EPS by 36% 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.

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. EBIT margins for Shera Energy remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 22% to ₹8.0b. That's encouraging news for the company!

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.

Shera Energy isn't a huge company, given its market capitalisation of ₹2.9b. That makes it extra important to check on its balance sheet strength.

Are Shera Energy Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The good news for Shera Energy shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Shivani Sheikh, the Whole Time Director of the company, paid ₹2.4m for shares at around ₹150 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

On top of the insider buying, we can also see that Shera Energy insiders own a large chunk of the company. Owning 39% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Valued at only ₹2.9b Shera Energy is really small for a listed company. So despite a large proportional holding, insiders only have ₹1.2b worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Shera Energy To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Shera Energy's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. These things considered, this is one stock worth watching. We should say that we've discovered 3 warning signs for Shera Energy (1 is a bit unpleasant!) that you should be aware of before investing here.

The good news is that Shera Energy is not the only growth stock with insider buying. Here's a list of growth-focused companies in IN 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.