We Ran A Stock Scan For Earnings Growth And ShreeOswal Seeds and Chemicals (NSE:OSWALSEEDS) Passed With Ease

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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like ShreeOswal Seeds and Chemicals (NSE:OSWALSEEDS), which has not only revenues, but also profits. 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.

See our latest analysis for ShreeOswal Seeds and Chemicals

How Quickly Is ShreeOswal Seeds and Chemicals Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, ShreeOswal Seeds and Chemicals has grown EPS by 22% per year, compound, in the last three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.

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 ShreeOswal Seeds and Chemicals remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 49% to ₹2.4b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Since ShreeOswal Seeds and Chemicals is no giant, with a market capitalisation of ₹5.9b, 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?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that ShreeOswal Seeds and Chemicals insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 70% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. To give you an idea, the value of insiders' holdings in the business are valued at ₹4.1b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Does ShreeOswal Seeds and Chemicals Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into ShreeOswal Seeds and Chemicals' strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. You still need to take note of risks, for example - ShreeOswal Seeds and Chemicals has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

The beauty of investing is that you can invest in almost 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.