I Ran A Stock Scan For Earnings Growth And Sree Rayalaseema Hi-Strength Hypo (NSE:SRHHYPOLTD) Passed With Ease

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. 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 Sree Rayalaseema Hi-Strength Hypo (NSE:SRHHYPOLTD). 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.

See our latest analysis for Sree Rayalaseema Hi-Strength Hypo

Sree Rayalaseema Hi-Strength Hypo's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. We can see that in the last three years Sree Rayalaseema Hi-Strength Hypo grew its EPS by 15% per year. That's a good rate of growth, if it can be sustained.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Sree Rayalaseema Hi-Strength Hypo's EBIT margins were flat over the last year, revenue grew by a solid 48% to ₹12b. That's progress.

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.

Sree Rayalaseema Hi-Strength Hypo isn't a huge company, given its market capitalization of ₹7.1b. That makes it extra important to check on its balance sheet strength.

Are Sree Rayalaseema Hi-Strength Hypo Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Sree Rayalaseema Hi-Strength Hypo shares worth a considerable sum. Indeed, they hold ₹928m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 13% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Sree Rayalaseema Hi-Strength Hypo Deserve A Spot On Your Watchlist?

One positive for Sree Rayalaseema Hi-Strength Hypo is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. You still need to take note of risks, for example - Sree Rayalaseema Hi-Strength Hypo has 2 warning signs we think you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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. 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.