With EPS Growth And More, Suven Pharmaceuticals (NSE:SUVENPHAR) Is Interesting

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

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Suven Pharmaceuticals (NSE:SUVENPHAR). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Suven Pharmaceuticals

How Fast Is Suven Pharmaceuticals Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. It's good to see that Suven Pharmaceuticals's EPS have grown from ₹11.92 to ₹13.88 over twelve months. I doubt many would complain about that 16% gain.

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. While we note Suven Pharmaceuticals's EBIT margins were flat over the last year, revenue grew by a solid 9.8% to ₹9.4b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Suven Pharmaceuticals.

Are Suven Pharmaceuticals 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.

Any way you look at it Suven Pharmaceuticals shareholders can gain quiet confidence from the fact that insiders shelled out ₹17m to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. Zooming in, we can see that the biggest insider purchase was by R. Padmakumar for ₹4.7m worth of shares, at about ₹235 per share.

The good news, alongside the insider buying, for Suven Pharmaceuticals bulls is that insiders (collectively) have a meaningful investment in the stock. Given insiders own a small fortune of shares, currently valued at ₹5.6b, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Should You Add Suven Pharmaceuticals To Your Watchlist?

One important encouraging feature of Suven Pharmaceuticals is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Suven Pharmaceuticals is trading on a high P/E or a low P/E, relative to its industry.

As a growth investor I do like to see insider buying. But Suven Pharmaceuticals isn't the only one. You can see a 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. 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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