Does Vidhi Specialty Food Ingredients (NSE:VIDHIING) Deserve A Spot On Your Watchlist?

By
Simply Wall St
Published
June 03, 2021
NSEI:VIDHIING
Source: Shutterstock

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 Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Vidhi Specialty Food Ingredients (NSE:VIDHIING). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Vidhi Specialty Food Ingredients

How Fast Is Vidhi Specialty Food Ingredients 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). That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Vidhi Specialty Food Ingredients has grown EPS by 31% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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 Vidhi Specialty Food Ingredients's EBIT margins were flat over the last year, revenue grew by a solid 5.5% to ₹2.3b. 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.

earnings-and-revenue-history
NSEI:VIDHIING Earnings and Revenue History June 4th 2021

Vidhi Specialty Food Ingredients isn't a huge company, given its market capitalization of ₹11b. That makes it extra important to check on its balance sheet strength.

Are Vidhi Specialty Food Ingredients Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Vidhi Specialty Food Ingredients insiders own a meaningful share of the business. In fact, they own 67% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. In terms of absolute value, insiders have ₹7.1b invested in the business, using the current share price. That's nothing to sneeze at!

Does Vidhi Specialty Food Ingredients Deserve A Spot On Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Vidhi Specialty Food Ingredients's strong EPS growth. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Still, you should learn about the 2 warning signs we've spotted with Vidhi Specialty Food Ingredients .

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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