Here's Why We Think MCON Rasayan India (NSE:MCON) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like MCON Rasayan India (NSE:MCON). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide MCON Rasayan India with the means to add long-term value to shareholders.

See our latest analysis for MCON Rasayan India

MCON Rasayan India's Improving Profits

In the last three years MCON Rasayan India'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. As a result, we'll zoom in on growth over the last year, instead. MCON Rasayan India's EPS skyrocketed from ₹2.62 to ₹3.56, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 35%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. MCON Rasayan India shareholders can take confidence from the fact that EBIT margins are up from 7.4% to 11%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Since MCON Rasayan India is no giant, with a market capitalisation of ₹1.1b, you should definitely check its cash and debt before getting too excited about its prospects.

Are MCON Rasayan India Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that MCON Rasayan India insiders own a significant number of shares certainly is appealing. In fact, they own 67% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only ₹1.1b MCON Rasayan India is really small for a listed company. That means insiders only have ₹704m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations under ₹17b, like MCON Rasayan India, the median CEO pay is around ₹3.4m.

The MCON Rasayan India CEO received total compensation of only ₹2.4m in the year to March 2024. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add MCON Rasayan India To Your Watchlist?

For growth investors, MCON Rasayan India's raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Everyone has their own preferences when it comes to investing but it definitely makes MCON Rasayan India look rather interesting indeed. What about risks? Every company has them, and we've spotted 4 warning signs for MCON Rasayan India (of which 1 is potentially serious!) you should know about.

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.