Here's Why I Think Sakar Healthcare (NSE:SAKAR) Is An Interesting Stock

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

So if you're like me, you might be more interested in profitable, growing companies, like Sakar Healthcare (NSE:SAKAR). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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 Sakar Healthcare

Sakar Healthcare's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. Who among us would not applaud Sakar Healthcare's stratospheric annual EPS growth of 38%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Sakar Healthcare is growing revenues, and EBIT margins improved by 2.1 percentage points to 19%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Sakar Healthcare isn't a huge company, given its market capitalization of ₹1.4b. That makes it extra important to check on its balance sheet strength.

Are Sakar Healthcare 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We haven't seen any insiders selling Sakar Healthcare shares, in the last year. So it's definitely nice that Chairman & MD Sanjay Shah bought ₹1.0m worth of shares at an average price of around ₹68.22.

On top of the insider buying, we can also see that Sakar Healthcare insiders own a large chunk of the company. Indeed, with a collective holding of 79%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about ₹1.1b riding on the stock, at current prices. That's nothing to sneeze at!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Sanjay Shah is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations under ₹15b, like Sakar Healthcare, the median CEO pay is around ₹3.4m.

The CEO of Sakar Healthcare was paid just ₹2.3m in total compensation for the year ending . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Should You Add Sakar Healthcare To Your Watchlist?

Sakar Healthcare's earnings have taken off like any random crypto-currency did, back in 2017. The cherry on top is that insiders own a bunch of shares, and one has been buying more. Because of the potential that it has reached an inflection point, I'd suggest Sakar Healthcare belongs on the top of your watchlist. Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Sakar Healthcare (2 make us uncomfortable) you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Sakar Healthcare, you'll probably love this free list of growing companies that insiders are buying.

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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