Should You Be Adding Nirman Agri Genetics (NSE:NIRMAN) To Your Watchlist Today?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Nirman Agri Genetics (NSE:NIRMAN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Nirman Agri Genetics with the means to add long-term value to shareholders.

View our latest analysis for Nirman Agri Genetics

Nirman Agri Genetics' Improving Profits

Over the last three years, Nirman Agri Genetics has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Nirman Agri Genetics' EPS catapulted from ₹12.09 to ₹30.08, over the last year. It's a rarity to see 149% year-on-year growth like that. The best case scenario? That the business has hit a true inflection point.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. On the one hand, Nirman Agri Genetics' EBIT margins fell over the last year, but on the other hand, revenue grew. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Since Nirman Agri Genetics is no giant, with a market capitalisation of ₹2.7b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Nirman Agri Genetics 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 as you can imagine, the fact that Nirman Agri Genetics insiders own a significant number of shares certainly is appealing. In fact, they own 66% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. To give you an idea, the value of insiders' holdings in the business are valued at ₹1.7b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Does Nirman Agri Genetics Deserve A Spot On Your Watchlist?

Nirman Agri Genetics' 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. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Nirman Agri Genetics for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Nirman Agri Genetics you should be aware of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

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.