Should You Be Adding Vaidya Sane Ayurved Laboratories (NSE:MADHAVBAUG) To Your Watchlist Today?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Vaidya Sane Ayurved Laboratories (NSE:MADHAVBAUG). 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 Vaidya Sane Ayurved Laboratories

Vaidya Sane Ayurved Laboratories' Improving Profits

Vaidya Sane Ayurved Laboratories has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Vaidya Sane Ayurved Laboratories' EPS soared from ₹3.30 to ₹4.60, over the last year. That's a impressive gain of 39%.

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. While we note Vaidya Sane Ayurved Laboratories achieved similar EBIT margins to last year, revenue grew by a solid 33% to ₹992m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Since Vaidya Sane Ayurved Laboratories is no giant, with a market capitalisation of ₹3.8b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Vaidya Sane Ayurved Laboratories 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 those who are interested in Vaidya Sane Ayurved Laboratories will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Indeed, with a collective holding of 70%, company insiders are in control and have plenty of capital behind the venture. 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. With that sort of holding, insiders have about ₹2.7b riding on the stock, at current prices. That's nothing to sneeze at!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Vaidya Sane Ayurved Laboratories with market caps under ₹17b is about ₹3.3m.

Vaidya Sane Ayurved Laboratories' CEO only received compensation totalling ₹2.0m in the year to March 2022. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add Vaidya Sane Ayurved Laboratories To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Vaidya Sane Ayurved Laboratories' strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that Vaidya Sane Ayurved Laboratories has underlying strengths that make it worth a look at. Even so, be aware that Vaidya Sane Ayurved Laboratories is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.