Do ShreeOswal Seeds and Chemicals's (NSE:OSWALSEEDS) Earnings Warrant Your Attention?

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like ShreeOswal Seeds and Chemicals (NSE:OSWALSEEDS). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for ShreeOswal Seeds and Chemicals

How Fast Is ShreeOswal Seeds and Chemicals Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Like a falcon taking flight, ShreeOswal Seeds and Chemicals's EPS soared from ₹2.82 to ₹3.62, over the last year. That's a commendable gain of 28%.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). ShreeOswal Seeds and Chemicals maintained stable EBIT margins over the last year, all while growing revenue 35% to ₹2.1b. That's progress.

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.

Since ShreeOswal Seeds and Chemicals is no giant, with a market capitalization of ₹747m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are ShreeOswal Seeds and Chemicals Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that ShreeOswal Seeds and Chemicals insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 87%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only ₹747m ShreeOswal Seeds and Chemicals is really small for a listed company. That means insiders only have ₹646m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add ShreeOswal Seeds and Chemicals To Your Watchlist?

You can't deny that ShreeOswal Seeds and Chemicals has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. However, before you get too excited we've discovered 3 warning signs for ShreeOswal Seeds and Chemicals (2 are potentially serious!) that you should be aware of.

You can invest in 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.