Here's Why Dhanuka Agritech (NSE:DHANUKA) Has Caught The Eye Of Investors

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. 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.

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 Dhanuka Agritech (NSE:DHANUKA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Dhanuka Agritech with the means to add long-term value to shareholders.

View our latest analysis for Dhanuka Agritech

How Quickly Is Dhanuka Agritech 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 makes EPS growth an attractive quality for any company. Dhanuka Agritech managed to grow EPS by 8.3% per year, over three years. That's a good rate of growth, if it can be sustained.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Dhanuka Agritech achieved similar EBIT margins to last year, revenue grew by a solid 6.9% to ₹18b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Dhanuka Agritech's future EPS 100% free.

Are Dhanuka Agritech Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We do note that Dhanuka Agritech insiders netted ₹9.3m worth of shares over the last year. But the silver lining to that cloud is that Ram Agarwal, the Group Executive Chairman, spent ₹9.8m buying shares at an average price of ₹967. And that's a reason to be optimistic.

The good news, alongside the insider buying, for Dhanuka Agritech bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at ₹1.4b. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 2.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Dhanuka Agritech To Your Watchlist?

One positive for Dhanuka Agritech is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Before you take the next step you should know about the 1 warning sign for Dhanuka Agritech that we have uncovered.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Dhanuka Agritech, you'll probably love this curated collection of companies in IN that have witnessed growth alongside 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.