Should You Be Adding Zodiac Energy (NSE:ZODIAC) To Your Watchlist Today?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Zodiac Energy (NSE:ZODIAC). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Zodiac Energy

How Quickly Is Zodiac Energy Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Zodiac Energy has managed to grow EPS by 21% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Zodiac Energy maintained stable EBIT margins over the last year, all while growing revenue 42% to ₹1.4b. 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.

Zodiac Energy isn't a huge company, given its market capitalization of ₹1.7b. That makes it extra important to check on its balance sheet strength.

Are Zodiac Energy Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

One positive for Zodiac Energy, is that company insiders paid ₹2.5m for shares in the last year. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. Zooming in, we can see that the biggest insider purchase was by Founder Kunjbihari Shah for ₹1.0m worth of shares, at about ₹28.04 per share.

Is Zodiac Energy Worth Keeping An Eye On?

For growth investors like me, Zodiac Energy's raw rate of earnings growth is a beacon in the night. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. So on this analysis I believe Zodiac Energy is probably worth spending some time on. We don't want to rain on the parade too much, but we did also find 3 warning signs for Zodiac Energy (1 is significant!) that you need to be mindful of.

As a growth investor I do like to see insider buying. But Zodiac Energy isn't the only one. You can see a a free list of them here.

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.