Here's Why We Think Rajshree Sugars and Chemicals (NSE:RAJSREESUG) Might Deserve Your Attention Today

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Rajshree Sugars and Chemicals (NSE:RAJSREESUG). 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 Rajshree Sugars and Chemicals

Rajshree Sugars and Chemicals' Improving Profits

In the last three years Rajshree Sugars and Chemicals' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, Rajshree Sugars and Chemicals' EPS catapulted from ₹2.47 to ₹6.44, over the last year. It's a rarity to see 161% year-on-year growth like that.

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 6.1 percentage points to 7.7%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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 Rajshree Sugars and Chemicals is no giant, with a market capitalisation of ₹2.4b, you should definitely check its cash and debt before getting too excited about its prospects.

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 we're pleased to report that Rajshree Sugars and Chemicals insiders own a meaningful share of the business. Actually, with 42% of the company to their names, insiders are profoundly invested in the business. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. Although, with Rajshree Sugars and Chemicals being valued at ₹2.4b, this is a small company we're talking about. So this large proportion of shares owned by insiders only amounts to ₹1.0b. That might not be a huge sum but it should be enough to keep insiders motivated!

Does Rajshree Sugars and Chemicals Deserve A Spot On Your Watchlist?

Rajshree Sugars and Chemicals' earnings have taken off in quite an impressive fashion. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. 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. You still need to take note of risks, for example - Rajshree Sugars and Chemicals has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

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.