With EPS Growth And More, Sakar Healthcare (NSE:SAKAR) Is Interesting

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Sakar Healthcare (NSE:SAKAR), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

View our latest analysis for Sakar Healthcare

How Fast Is Sakar Healthcare 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 Sakar Healthcare has managed to grow EPS by 30% 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 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. While we note Sakar Healthcare's EBIT margins were flat over the last year, revenue grew by a solid 14% to ₹959m. That's a real positive.

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.

Since Sakar Healthcare is no giant, with a market capitalization of ₹2.7b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Sakar Healthcare Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

One shining light for Sakar Healthcare is the serious outlay one insider has made to buy shares, in the last year. Specifically, the Chairman & MD, Sanjay Shah, accumulated ₹79m worth of shares around ₹120. It doesn't get much better than that, in terms of large investments from insiders.

On top of the insider buying, we can also see that Sakar Healthcare insiders own a large chunk of the company. In fact, they own 73% 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. In terms of absolute value, insiders have ₹2.0b invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

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. That's because on our analysis the CEO, Sanjay Shah, is paid less than the median for similar sized companies. For companies with market capitalizations under ₹15b, like Sakar Healthcare, the median CEO pay is around ₹3.0m.

The CEO of Sakar Healthcare was paid just ₹2.3m in total compensation for the year ending . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Sakar Healthcare Deserve A Spot On Your Watchlist?

For growth investors like me, Sakar Healthcare's raw rate of earnings growth is a beacon in the night. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So it's fair to say I think this stock may well deserve a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 5 warning signs for Sakar Healthcare (1 can't be ignored!) that you need to be mindful 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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