Stock Analysis

Does Surya Roshni (NSE:SURYAROSNI) Deserve A Spot On Your Watchlist?

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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 Surya Roshni (NSE:SURYAROSNI). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

View our latest analysis for Surya Roshni

How Fast Is Surya Roshni 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. Impressively, Surya Roshni has grown EPS by 17% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Surya Roshni's EBIT margins were flat over the last year, revenue grew by a solid 38% to ₹72b. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

NSEI:SURYAROSNI Earnings and Revenue History May 12th 2022

Since Surya Roshni is no giant, with a market capitalization of ₹20b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Surya Roshni 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 Surya Roshni shares worth a considerable sum. To be specific, they have ₹1.6b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 7.9% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Surya Roshni Deserve A Spot On Your Watchlist?

For growth investors like me, Surya Roshni's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Surya Roshni that you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether Surya Roshni is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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