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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 Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
So if you're like me, you might be more interested in profitable, growing companies, like AstraZeneca Pharma India (NSE:ASTRAZEN). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
Check out our latest analysis for AstraZeneca Pharma India
AstraZeneca Pharma India's Improving Profits
In the last three years AstraZeneca Pharma India's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, AstraZeneca Pharma India's EPS shot from ₹10.36 to ₹21.78, over the last year. You don't see 110% year-on-year growth like that, very often.
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 AstraZeneca Pharma India's EBIT margins were flat over the last year, revenue grew by a solid 28% to ₹7.3b. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are AstraZeneca Pharma India Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that AstraZeneca Pharma India insiders have a significant amount of capital invested in the stock. To be specific, they have ₹2.6b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 5.5% of the company, demonstrating a degree of high-level alignment with shareholders.