I Ran A Stock Scan For Earnings Growth And Visaka Industries (NSE:VISAKAIND) 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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Visaka Industries (NSE:VISAKAIND). 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.

See our latest analysis for Visaka Industries

How Quickly Is Visaka Industries Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Visaka Industries managed to grow EPS by 13% per year, over three years. That's a pretty good rate, if the company can sustain it.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Visaka Industries's EBIT margins have actually improved by 5.2 percentage points in the last year, to reach 13%, but, on the flip side, revenue was down 9.3%. That's not ideal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Visaka Industries is no giant, with a market capitalization of ₹8.2b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Visaka Industries Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news is that Visaka Industries insiders spent a whopping ₹118m on stock in just one year, and I didn't see any selling. As if for a flower bud approaching bloom, I become an expectant observer, anticipating with hope, that something splendid is coming. Zooming in, we can see that the biggest insider purchase was by MD & Executive Director G. Vivekanand for ₹24m worth of shares, at about ₹241 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Visaka Industries insiders own more than a third of the company. In fact, they own 47% of the shares, making insiders a very influential shareholder group. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. With that sort of holding, insiders have about ₹3.9b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Visaka Industries To Your Watchlist?

One important encouraging feature of Visaka Industries is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. You should always think about risks though. Case in point, we've spotted 3 warning signs for Visaka Industries you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Visaka Industries, you'll probably love this free list of growing companies that insiders are buying.

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

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