Do Himadri Speciality Chemical's (NSE:HSCL) Earnings Warrant Your Attention?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

In contrast to all that, many investors prefer to focus on companies like Himadri Speciality Chemical (NSE:HSCL), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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How Fast Is Himadri Speciality Chemical Growing Its Earnings Per Share?

In the last three years Himadri Speciality Chemical's 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. Himadri Speciality Chemical's EPS has risen over the last 12 months, growing from ₹8.56 to ₹10.44. There's little doubt shareholders would be happy with that 22% gain.

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. EBIT margins for Himadri Speciality Chemical remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 15% to ₹47b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Check out our latest analysis for Himadri Speciality Chemical

While profitability drives the upside, prudent investors always check the balance sheet, too .

Are Himadri Speciality Chemical Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Himadri Speciality Chemical followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Notably, they have an enviable stake in the company, worth ₹35b. Coming in at 16% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Looking very optimistic for investors.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Himadri Speciality Chemical, with market caps between ₹171b and ₹547b, is around ₹52m.

The Himadri Speciality Chemical CEO received ₹35m in compensation for the year ending March 2024. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Himadri Speciality Chemical Deserve A Spot On Your Watchlist?

As previously touched on, Himadri Speciality Chemical is a growing business, which is encouraging. Earnings growth might be the main attraction for Himadri Speciality Chemical, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Now, you could try to make up your mind on Himadri Speciality Chemical by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry .

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.