Here's Why Kilitch Drugs (India) (NSE:KILITCH) Has Caught The Eye Of Investors

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Kilitch Drugs (India) (NSE:KILITCH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Kilitch Drugs (India) with the means to add long-term value to shareholders.

Check out our latest analysis for Kilitch Drugs (India)

How Fast Is Kilitch Drugs (India) 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) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that Kilitch Drugs (India) has grown EPS by 55% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. The good news is that Kilitch Drugs (India) is growing revenues, and EBIT margins improved by 6.0 percentage points to 11%, over the last year. Ticking those two boxes is a good sign of growth, in our 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 capitalisation of ₹3.2b. That makes it extra important to check on its balance sheet strength.

Are Kilitch Drugs (India) 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 those who are interested in Kilitch Drugs (India) will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 41% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. To give you an idea, the value of insiders' holdings in the business are valued at ₹1.3b at the current share price. So there's plenty there to keep them focused!

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

Kilitch Drugs (India)'s earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Kilitch Drugs (India) is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You still need to take note of risks, for example - Kilitch Drugs (India) has 2 warning signs (and 1 which is significant) we think you should know about.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you 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.

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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.