Should You Be Adding Camlin Fine Sciences (NSE:CAMLINFINE) To Your Watchlist Today?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Camlin Fine Sciences (NSE:CAMLINFINE). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Camlin Fine Sciences

How Fast Is Camlin Fine Sciences Growing Its Earnings Per Share?

In the last three years Camlin Fine Sciences's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Over twelve months, Camlin Fine Sciences increased its EPS from ₹2.30 to ₹2.40. That's a modest gain of 4.2%.

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). Camlin Fine Sciences shareholders can take confidence from the fact that EBIT margins are up from 7.7% to 11%, and revenue is growing. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Since Camlin Fine Sciences is no giant, with a market capitalization of ₹16b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Camlin Fine Sciences Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Camlin Fine Sciences insiders have a significant amount of capital invested in the stock. Indeed, they hold ₹3.5b worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 22% of the company; visible skin in the game.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Camlin Fine Sciences with market caps between ₹7.3b and ₹29b is about ₹21m.

The Camlin Fine Sciences CEO received ₹18m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Camlin Fine Sciences Worth Keeping An Eye On?

One important encouraging feature of Camlin Fine Sciences is that it is growing profits. Earnings growth might be the main game for Camlin Fine Sciences, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. We should say that we've discovered 3 warning signs for Camlin Fine Sciences (1 is a bit concerning!) that you should be aware of before investing here.

Although Camlin Fine Sciences certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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. 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.
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