Here's Why We Think Venus Remedies (NSE:VENUSREM) Is Well Worth Watching

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.

In contrast to all that, I prefer to spend time on companies like Venus Remedies (NSE:VENUSREM), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Venus Remedies

How Fast Is Venus Remedies Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. You can imagine, then, that it almost knocked my socks off when I realized that Venus Remedies grew its EPS from ₹7.02 to ₹61.06, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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 Venus Remedies is growing revenues, and EBIT margins improved by 2.8 percentage points to 6.1%, over the last year. That's great to see, on both counts.

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.

Since Venus Remedies is no giant, with a market capitalization of ₹6.1b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Venus Remedies 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did Venus Remedies insiders refrain from selling stock during the year, but they also spent ₹10m buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. We also note that it was the Chairman, Pawan Chaudhary, who made the biggest single acquisition, paying ₹6.0m for shares at about ₹10.00 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Venus Remedies insiders own more than a third of the company. Actually, with 41% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have ₹2.5b invested in the business, using the current share price. That's nothing to sneeze at!

Should You Add Venus Remedies To Your Watchlist?

Venus Remedies's earnings have taken off like any random crypto-currency did, back in 2017. Just as heartening; insiders both own and are buying more stock. Because of the potential that it has reached an inflection point, I'd suggest Venus Remedies belongs on the top of your watchlist. Still, you should learn about the 4 warning signs we've spotted with Venus Remedies .

As a growth investor I do like to see insider buying. But Venus Remedies 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.

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.

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