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

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

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. 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.

View 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. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Mahickra Chemicals grew its EPS by 13% per year. That's a good rate of growth, if it can be sustained.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Mahickra Chemicals's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Mahickra Chemicals maintained stable EBIT margins over the last year, all while growing revenue 20% to ₹1.1b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Mahickra Chemicals isn't a huge company, given its market capitalization of ₹573m. That makes it extra important to check on its balance sheet strength.

Are Mahickra Chemicals Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Mahickra Chemicals insiders refrain from selling stock during the year, but they also spent ₹9.3m buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. It is also worth noting that it was Chairman & MD Miteshkumar Gandhi who made the biggest single purchase, worth ₹374k, paying ₹83.75 per share.

I do like that insiders have been buying shares in Mahickra Chemicals, but there is more evidence of shareholder friendly management. I refer to the very reasonable level of CEO pay. For companies with market capitalizations under ₹16b, like Mahickra Chemicals, the median CEO pay is around ₹3.0m.

The CEO of Mahickra Chemicals was paid just ₹1.3m in total compensation for the year ending . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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. It can also be a sign of a culture of integrity, in a broader sense.

Does Mahickra Chemicals Deserve A Spot On Your Watchlist?

One positive for Mahickra Chemicals is that it is growing EPS. That's nice to see. And that's not all, folks. We've also seen insiders buying stock, and noted modest executive pay. If that doesn't automatically earn it a spot on your watchlist then I'd posit it warrants a closer look at the very least. You still need to take note of risks, for example - Mahickra Chemicals has 1 warning sign we think you should be aware of.

As a growth investor I do like to see insider buying. But Mahickra Chemicals isn't the only one. You can see a a free list of them here.

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.