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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 the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Himadri Speciality Chemical (NSE:HSCL). 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.
See our latest analysis for Himadri Speciality Chemical
Himadri Speciality Chemical's Improving Profits
Over the last three years, Himadri Speciality Chemical has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a falcon taking flight, Himadri Speciality Chemical's EPS soared from ₹5.91 to ₹7.75, over the last year. That's a commendable gain of 31%.
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. Himadri Speciality Chemical maintained stable EBIT margins over the last year, all while growing revenue 20% to ₹24b. 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.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Himadri Speciality Chemical.
Are Himadri Speciality Chemical Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Himadri Speciality Chemical shares worth a considerable sum. To be specific, they have ₹2.4b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 5.3% of the company; visible skin in the game.