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Does AstraZeneca Pharma India Deserve A Spot On Your Watchlist?

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.

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. Year on year growth of 110% is certainly a sight to behold.

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 progress.

Are AstraZeneca Pharma India 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 AstraZeneca Pharma India shares worth a considerable sum. Indeed, they hold ₹2.6b worth of its stock. That’s a lot of money, and no small incentive to work hard. That amounts to 5.5% of the company, demonstrating a degree of high-level alignment with shareholders.

It’s good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between ₹28b and ₹111b, like AstraZeneca Pharma India, the median CEO pay is around ₹24m.

The AstraZeneca Pharma India CEO received ₹20.0m in compensation for the year ending March 2018. That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is AstraZeneca Pharma India Worth Keeping An Eye On?

AstraZeneca Pharma India’s earnings per share growth has been so hot recently that thinking about it is making me blush. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. AstraZeneca Pharma India certainly ticks a few of my boxes, so I think it’s probably well worth further consideration. Another important measure of business quality not discussed here, is return on equity (ROE).

Although AstraZeneca Pharma India certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.- Simply Wall Street 

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