I Ran A Stock Scan For Earnings Growth And Fineotex Chemical (NSE:FCL) Passed With Ease

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Fineotex Chemical (NSE:FCL). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Fineotex Chemical

How Fast Is Fineotex Chemical Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Fineotex Chemical has managed to grow EPS by 35% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Fineotex Chemical's EBIT margins were flat over the last year, revenue grew by a solid 69% to ₹3.7b. That's progress.

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.

Fineotex Chemical isn't a huge company, given its market capitalization of ₹18b. That makes it extra important to check on its balance sheet strength.

Are Fineotex Chemical Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Fineotex Chemical insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 64%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about ₹11b riding on the stock, at current prices. That's nothing to sneeze at!

Should You Add Fineotex Chemical To Your Watchlist?

For growth investors like me, Fineotex Chemical's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Before you take the next step you should know about the 2 warning signs for Fineotex Chemical (1 is a bit unpleasant!) that we have uncovered.

Although Fineotex Chemical 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. 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.