Here's Why I Think Kilitch Drugs (India) (NSE:KILITCH) Might Deserve Your Attention Today

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like Kilitch Drugs (India) (NSE:KILITCH), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Kilitch Drugs (India)

Kilitch Drugs (India)'s Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. Like the last firework on New Year's Eve accelerating into the sky, Kilitch Drugs (India)'s EPS shot from ₹1.10 to ₹3.22, over the last year. Year on year growth of 192% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

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). Kilitch Drugs (India) shareholders can take confidence from the fact that EBIT margins are up from 2.5% to 4.9%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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.

Kilitch Drugs (India) isn't a huge company, given its market capitalization of ₹3.5b. That makes it extra important to check on its balance sheet strength.

Are Kilitch Drugs (India) 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. So it is good to see that Kilitch Drugs (India) insiders have a significant amount of capital invested in the stock. Indeed, they hold ₹959m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 28% of the company, demonstrating a degree of high-level alignment with shareholders.

Is Kilitch Drugs (India) Worth Keeping An Eye On?

Kilitch Drugs (India)'s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Kilitch Drugs (India) is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Before you take the next step you should know about the 2 warning signs for Kilitch Drugs (India) that we have uncovered.

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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.