Here's Why I Think Sudarshan Chemical Industries (NSE:SUDARSCHEM) Might Deserve Your Attention Today

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

So if you're like me, you might be more interested in profitable, growing companies, like Sudarshan Chemical Industries (NSE:SUDARSCHEM). 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 Sudarshan Chemical Industries

Sudarshan Chemical Industries'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 means EPS growth is considered a real positive by most successful long-term investors. Sudarshan Chemical Industries managed to grow EPS by 11% per year, over three years. 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. Sudarshan Chemical Industries maintained stable EBIT margins over the last year, all while growing revenue 9.0% to ₹16b. That's progress.

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.

Fortunately, we've got access to analyst forecasts of Sudarshan Chemical Industries's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Sudarshan Chemical Industries 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

One gleaming positive for Sudarshan Chemical Industries, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, in one large transaction MD, BR Head & Executive Director Rajesh Rathi paid ₹30m, for stock at ₹348 per share. It doesn't get much better than that, in terms of large investments from insiders.

On top of the insider buying, we can also see that Sudarshan Chemical Industries insiders own a large chunk of the company. Indeed, with a collective holding of 58%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. And their holding is extremely valuable at the current share price, totalling ₹19b. That means they have plenty of their own capital riding on the performance of the business!

Does Sudarshan Chemical Industries Deserve A Spot On Your Watchlist?

One important encouraging feature of Sudarshan Chemical Industries is that it is growing profits. 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. What about risks? Every company has them, and we've spotted 1 warning sign for Sudarshan Chemical Industries you should know about.

As a growth investor I do like to see insider buying. But Sudarshan Chemical Industries 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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