Do UGRO Capital's (NSE:UGROCAP) Earnings Warrant Your Attention?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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

View our latest analysis for UGRO Capital

How Fast Is UGRO Capital Growing Its Earnings Per Share?

Over the last three years, UGRO Capital has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, UGRO Capital's EPS soared from ₹10.41 to ₹14.10, over the last year. That's a commendable gain of 35%.

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. It's noted that UGRO Capital's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. UGRO Capital maintained stable EBIT margins over the last year, all while growing revenue 35% to ₹5.8b. That's progress.

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.

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 UGRO Capital's future EPS 100% free.

Are UGRO Capital Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own UGRO Capital shares worth a considerable sum. As a matter of fact, their holding is valued at ₹1.1b. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 4.8%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Does UGRO Capital Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into UGRO Capital's strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in UGRO Capital's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with UGRO Capital , and understanding them should be part of your investment process.

Although UGRO Capital 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.