I Ran A Stock Scan For Earnings Growth And Shree Pushkar Chemicals & Fertilisers (NSE:SHREEPUSHK) Passed With Ease

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

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Shree Pushkar Chemicals & Fertilisers (NSE:SHREEPUSHK). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Shree Pushkar Chemicals & Fertilisers

Shree Pushkar Chemicals & Fertilisers'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. Shree Pushkar Chemicals & Fertilisers managed to grow EPS by 6.5% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. Shree Pushkar Chemicals & Fertilisers shareholders can take confidence from the fact that EBIT margins are up from 8.5% to 12%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

Since Shree Pushkar Chemicals & Fertilisers is no giant, with a market capitalization of ₹7.7b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Shree Pushkar Chemicals & Fertilisers 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.

Despite -₹8.0m worth of sales, Shree Pushkar Chemicals & Fertilisers insiders have overwhelmingly been buying the stock, spending ₹49m on purchases in the last twelve months. You could argue that level of buying implies genuine confidence in the business. We also note that it was the Joint MD, Gautam Makharia, who made the biggest single acquisition, paying ₹37m for shares at about ₹208 each.

On top of the insider buying, we can also see that Shree Pushkar Chemicals & Fertilisers insiders own a large chunk of the company. Indeed, with a collective holding of 69%, 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. With that sort of holding, insiders have about ₹5.3b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

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. The cherry on top is that the CEO, Punit Makharia is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations under ₹15b, like Shree Pushkar Chemicals & Fertilisers, the median CEO pay is around ₹3.0m.

The Shree Pushkar Chemicals & Fertilisers CEO received total compensation of only ₹1.7m in the year to . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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 good governance, more generally.

Does Shree Pushkar Chemicals & Fertilisers Deserve A Spot On Your Watchlist?

One important encouraging feature of Shree Pushkar Chemicals & Fertilisers is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. What about risks? Every company has them, and we've spotted 3 warning signs for Shree Pushkar Chemicals & Fertilisers you should know about.

As a growth investor I do like to see insider buying. But Shree Pushkar Chemicals & Fertilisers 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.