Here's Why We Think Solex Energy (NSE:SOLEX) Might Deserve Your Attention Today

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Solex Energy (NSE:SOLEX). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Solex Energy with the means to add long-term value to shareholders.

Check out our latest analysis for Solex Energy

How Fast Is Solex Energy Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It's an outstanding feat for Solex Energy to have grown EPS from ₹3.89 to ₹21.04 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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 Solex Energy achieved similar EBIT margins to last year, revenue grew by a solid 133% to ₹5.5b. That's encouraging news for the company!

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.

Solex Energy isn't a huge company, given its market capitalisation of ₹11b. That makes it extra important to check on its balance sheet strength.

Are Solex Energy Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's pleasing to note that insiders spent ₹84m buying Solex Energy shares, over the last year, without reporting any share sales whatsoever. Knowing this, Solex Energy will have have all eyes on them in anticipation for the what could happen in the near future. Zooming in, we can see that the biggest insider purchase was by Chairman & MD Chetan Shah for ₹15m worth of shares, at about ₹909 per share.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Solex Energy will reveal that insiders own a significant piece of the pie. Indeed, with a collective holding of 64%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. In terms of absolute value, insiders have ₹6.8b invested in the business, at the current share price. So there's plenty there to keep them focused!

Is Solex Energy Worth Keeping An Eye On?

Solex Energy's earnings per share growth have been climbing higher at an appreciable rate. Just as heartening; insiders both own and are buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Solex Energy belongs near the top of your watchlist. Before you take the next step you should know about the 3 warning signs for Solex Energy (2 are potentially serious!) that we have uncovered.

Keen growth investors love to see insider activity. Thankfully, Solex Energy isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by high insider ownership.

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. 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.