If You Like EPS Growth Then Check Out Rallis India (NSE:RALLIS) Before It's Too Late

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Rallis India (NSE:RALLIS). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Rallis India

Rallis India's Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Rallis India has grown EPS by 11% per year. That growth rate is fairly good, assuming the company can keep it up.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Rallis India maintained stable EBIT margins over the last year, all while growing revenue 7.9% to ₹24b. 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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Rallis India's forecast profits?

Are Rallis India 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

For the sake of balance, I do note Rallis India insiders sold -₹574k worth of shares last year. But this is outweighed by the Anil Gupta who spent ₹9.0m buying shares, at an average price of around around ₹305.

Along with the insider buying, another encouraging sign for Rallis India is that insiders, as a group, have a considerable shareholding. With a whopping ₹7.0b worth of shares as a group, insiders have plenty riding on the company's success. At 11% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

Should You Add Rallis India To Your Watchlist?

One positive for Rallis India is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Rallis India is trading on a high P/E or a low P/E, relative to its industry.

As a growth investor I do like to see insider buying. But Rallis India 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. 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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