Here's Why Vascon Engineers (NSE:VASCONEQ) Has Caught The Eye Of Investors

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. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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

Check out our latest analysis for Vascon Engineers

How Fast Is Vascon Engineers Growing?

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 means EPS growth is considered a real positive by most successful long-term investors. Recognition must be given to the that Vascon Engineers has grown EPS by 49% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. The good news is that Vascon Engineers is growing revenues, and EBIT margins improved by 2.6 percentage points to 5.8%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Vascon Engineers isn't a huge company, given its market capitalisation of ₹7.4b. That makes it extra important to check on its balance sheet strength.

Are Vascon Engineers 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We do note that Vascon Engineers insiders netted ₹12m worth of shares over the last year. On the other hand, Chairman Emeritus Vasudevan Ramamoorthy paid ₹13m for shares, at a price of about ₹38.38 per share. And that's a reason to be optimistic.

The good news, alongside the insider buying, for Vascon Engineers bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have ₹2.2b worth of shares. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 29% of the shares on issue for the business, an appreciable amount considering the market cap.

Does Vascon Engineers Deserve A Spot On Your Watchlist?

Vascon Engineers' earnings have taken off in quite an impressive fashion. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Vascon Engineers belongs near the top of your watchlist. What about risks? Every company has them, and we've spotted 3 warning signs for Vascon Engineers you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Vascon Engineers, you'll probably love this free list of growing companies that insiders are buying.

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.