With EPS Growth And More, Apollo Hospitals Enterprise (NSE:APOLLOHOSP) Is Interesting

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In contrast to all that, I prefer to spend time on companies like Apollo Hospitals Enterprise (NSE:APOLLOHOSP), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.

See our latest analysis for Apollo Hospitals Enterprise

Apollo Hospitals Enterprise's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Impressively, Apollo Hospitals Enterprise has grown EPS by 27% per year, compound, in the last three years. So it's not surprising to see the company trades on a very high multiple of (past) earnings.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Apollo Hospitals Enterprise maintained stable EBIT margins over the last year, all while growing revenue 17% to ₹112b. That's a real positive.

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

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Apollo Hospitals Enterprise's forecast profits?

Are Apollo Hospitals Enterprise 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Apollo Hospitals Enterprise top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the , Karthik Anand, paid ₹6.9m to buy shares at an average price of ₹1,109.

Along with the insider buying, another encouraging sign for Apollo Hospitals Enterprise is that insiders, as a group, have a considerable shareholding. Indeed, they have a glittering mountain of wealth invested in it, currently valued at ₹26b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Suneeta Reddy, is paid less than the median for similar sized companies. For companies with market capitalizations between ₹146b and ₹468b, like Apollo Hospitals Enterprise, the median CEO pay is around ₹57m.

Apollo Hospitals Enterprise offered total compensation worth ₹40m to its CEO in the year to . 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 a culture of integrity, in a broader sense.

Is Apollo Hospitals Enterprise Worth Keeping An Eye On?

For growth investors like me, Apollo Hospitals Enterprise's raw rate of earnings growth is a beacon in the night. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So I do think this is one stock worth watching. You still need to take note of risks, for example - Apollo Hospitals Enterprise has 2 warning signs (and 1 which can't be ignored) we think you should know about.

As a growth investor I do like to see insider buying. But Apollo Hospitals Enterprise isn't the only one. You can see a a free list of them here.

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

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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