Does Rajshree Sugars and Chemicals (NSE:RAJSREESUG) Deserve A Spot On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Rajshree Sugars and Chemicals (NSE:RAJSREESUG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Rajshree Sugars and Chemicals with the means to add long-term value to shareholders.

Check out our latest analysis for Rajshree Sugars and Chemicals

How Fast Is Rajshree Sugars and Chemicals Growing Its Earnings Per Share?

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It's an outstanding feat for Rajshree Sugars and Chemicals to have grown EPS from ₹0.028 to ₹3.31 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Rajshree Sugars and Chemicals is growing revenues, and EBIT margins improved by 4.2 percentage points to 6.1%, over the last year. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Rajshree Sugars and Chemicals isn't a huge company, given its market capitalisation of ₹1.8b. That makes it extra important to check on its balance sheet strength.

Are Rajshree Sugars and Chemicals Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Rajshree Sugars and Chemicals insiders own a significant number of shares certainly is appealing. Actually, with 41% of the company to their names, insiders are profoundly invested in the business. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Of course, Rajshree Sugars and Chemicals is a very small company, with a market cap of only ₹1.8b. That means insiders only have ₹733m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Is Rajshree Sugars and Chemicals Worth Keeping An Eye On?

Rajshree Sugars and Chemicals' earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Rajshree Sugars and Chemicals is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that Rajshree Sugars and Chemicals is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Although Rajshree Sugars and Chemicals certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.