With EPS Growth And More, Zen Technologies (NSE:ZENTEC) Makes An Interesting Case

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Zen Technologies (NSE:ZENTEC). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Zen Technologies

Zen Technologies' Improving Profits

Over the last three years, Zen Technologies has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Zen Technologies' EPS catapulted from ₹10.34 to ₹17.46, over the last year. Year on year growth of 69% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Zen Technologies maintained stable EBIT margins over the last year, all while growing revenue 79% to ₹5.6b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Zen Technologies' balance sheet strength, before getting too excited.

Are Zen Technologies Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.

The good news for Zen Technologies shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Sanjay Vijay Jesrani, the Non-Executive Independent Additional Director of the company, paid ₹896k for shares at around ₹896 each. It seems that at least one insider is prepared to show the market there is potential within Zen Technologies.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Zen Technologies will reveal that insiders own a significant piece of the pie. To be exact, company insiders hold 52% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. This is an incredible endorsement from them.

Does Zen Technologies Deserve A Spot On Your Watchlist?

Zen Technologies' earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Zen Technologies deserves timely attention. Before you take the next step you should know about the 1 warning sign for Zen Technologies that we have uncovered.

Keen growth investors love to see insider activity. Thankfully, Zen Technologies 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.