If You Like EPS Growth Then Check Out Mahickra Chemicals (NSE:MAHICKRA) Before It's Too Late

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Mahickra Chemicals (NSE:MAHICKRA). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Mahickra Chemicals

Mahickra Chemicals's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. I, for one, am blown away by the fact that Mahickra Chemicals has grown EPS by 56% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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 Mahickra Chemicals's EBIT margins were flat over the last year, revenue grew by a solid 19% to ₹964m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Mahickra Chemicals isn't a huge company, given its market capitalization of ₹642m. That makes it extra important to check on its balance sheet strength.

Are Mahickra Chemicals Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Not only did Mahickra Chemicals insiders refrain from selling stock during the year, but they also spent ₹3.9m buying it. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was Whole-Time Director Ashishkumar Gandhi who made the biggest single purchase, worth ₹583k, paying ₹77.78 per share.

On top of the insider buying, we can also see that Mahickra Chemicals insiders own a large chunk of the company. Indeed, with a collective holding of 62%, 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. Of course, Mahickra Chemicals is a very small company, with a market cap of only ₹642m. That means insiders only have ₹399m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Miteshkumar Gandhi, is paid less than the median for similar sized companies. For companies with market capitalizations under ₹15b, like Mahickra Chemicals, the median CEO pay is around ₹3.1m.

The Mahickra Chemicals CEO received total compensation of only ₹1.3m in the year to . 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 isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does Mahickra Chemicals Deserve A Spot On Your Watchlist?

Mahickra Chemicals's earnings per share have taken off like a rocket aimed right at the moon. What's more insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Mahickra Chemicals deserves timely attention. We don't want to rain on the parade too much, but we did also find 4 warning signs for Mahickra Chemicals (2 are potentially serious!) that you need to be mindful of.

The good news is that Mahickra Chemicals is not the only growth stock with insider buying. Here's a list of them... with 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. 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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