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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. 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 Kamdhenu (NSE:KAMDHENU), 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. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
View our latest analysis for Kamdhenu
Kamdhenu's Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Kamdhenu has grown EPS by 37% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a glint in the eye of my lover.
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. Kamdhenu maintained stable EBIT margins over the last year, all while growing revenue 4.5% to ₹12b. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
Since Kamdhenu is no giant, with a market capitalization of ₹4.0b, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Kamdhenu 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The good news is that Kamdhenu insiders spent a whopping ₹100m on stock in just one year, and I didn't see any selling. As if for a flower bud approaching bloom, I become an expectant observer, anticipating with hope, that something splendid is coming. It is also worth noting that it was Whole Time Director Sunil Agarwal who made the biggest single purchase, worth ₹50m, paying ₹100.00 per share.