Is Now The Time To Put IOL Chemicals and Pharmaceuticals (NSE:IOLCP) On Your Watchlist?

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 Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like IOL Chemicals and Pharmaceuticals (NSE:IOLCP), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for IOL Chemicals and Pharmaceuticals

How Fast Is IOL Chemicals and Pharmaceuticals Growing Its Earnings Per Share?

Over the last three years, IOL Chemicals and Pharmaceuticals has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that IOL Chemicals and Pharmaceuticals's EPS have grown from ₹63.13 to ₹77.10 over twelve months. That's a 22% gain; respectable growth in the broader scheme of things.

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 IOL Chemicals and Pharmaceuticals's EBIT margins were flat over the last year, revenue grew by a solid 5.6% to ₹19b. That's a real positive.

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.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are IOL Chemicals and Pharmaceuticals Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that IOL Chemicals and Pharmaceuticals insiders have a significant amount of capital invested in the stock. Indeed, they hold ₹2.0b worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 4.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is IOL Chemicals and Pharmaceuticals Worth Keeping An Eye On?

One positive for IOL Chemicals and Pharmaceuticals 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. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with IOL Chemicals and Pharmaceuticals (at least 1 which is concerning) , and understanding these should be part of your investment process.

Although IOL Chemicals and Pharmaceuticals certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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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