I Ran A Stock Scan For Earnings Growth And Amrutanjan Health Care (NSE:AMRUTANJAN) Passed With Ease

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Amrutanjan Health Care (NSE:AMRUTANJAN). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Amrutanjan Health Care

How Quickly Is Amrutanjan Health Care Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Amrutanjan Health Care's EPS has grown 18% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. This approach makes Amrutanjan Health Care look pretty good, on balance; although revenue is flattish, EBIT margins improved from 11% to 13% in the last year. That's something to smile about.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Amrutanjan Health Care isn't a huge company, given its market capitalization of ₹12b. That makes it extra important to check on its balance sheet strength.

Are Amrutanjan Health Care Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Amrutanjan Health Care insiders own a meaningful share of the business. Indeed, with a collective holding of 54%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about ₹6.7b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

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. I discovered that the median total compensation for the CEOs of companies like Amrutanjan Health Care with market caps between ₹7.4b and ₹29b is about ₹22m.

Amrutanjan Health Care offered total compensation worth ₹13m to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add Amrutanjan Health Care To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Amrutanjan Health Care's strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the takeaway for me is that Amrutanjan Health Care is worth keeping an eye on. Of course, just because Amrutanjan Health Care is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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