Here's Why I Think Par Drugs and Chemicals (NSE:PAR) Might Deserve Your Attention Today

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In contrast to all that, I prefer to spend time on companies like Par Drugs and Chemicals (NSE:PAR), 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. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Par Drugs and Chemicals

How Fast Is Par Drugs and Chemicals Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Par Drugs and Chemicals has managed to grow EPS by 29% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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). The good news is that Par Drugs and Chemicals is growing revenues, and EBIT margins improved by 10.3 percentage points to 19%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Par Drugs and Chemicals isn't a huge company, given its market capitalization of ₹431m. That makes it extra important to check on its balance sheet strength.

Are Par Drugs and Chemicals Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

In the last twelve months Par Drugs and Chemicals insiders spent ₹791k on stock; good news for shareholders. While this isn't much, we also note an absence of sales. Zooming in, we can see that the biggest insider purchase was by Whole Time Director Ghanshayambhai Savani for ₹319k worth of shares, at about ₹39.86 per share.

On top of the insider buying, we can also see that Par Drugs and Chemicals insiders own a large chunk of the company. In fact, they own 80% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, Par Drugs and Chemicals is a very small company, with a market cap of only ₹431m. That means insiders only have ₹345m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Par Drugs and Chemicals To Your Watchlist?

For growth investors like me, Par Drugs and Chemicals's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So it's fair to say I think this stock may well deserve a spot on your watchlist. Still, you should learn about the 3 warning signs we've spotted with Par Drugs and Chemicals (including 1 which can't be ignored) .

The good news is that Par Drugs and Chemicals is not the only growth stock with insider buying. Here's a list of them... 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. 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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