With EPS Growth And More, Arman Financial Services (NSE:ARMANFIN) Is Interesting

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Arman Financial Services (NSE:ARMANFIN). While profit is not necessarily a social good, it's easy to admire a business that 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.

View our latest analysis for Arman Financial Services

How Fast Is Arman Financial Services Growing Its Earnings Per Share?

In the last three years Arman Financial Services'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. As a result, I'll zoom in on growth over the last year, instead. Arman Financial Services has grown its trailing twelve month EPS from ₹40.90 to ₹44.42, in the last year. That amounts to a small improvement of 8.6%.

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. I note that Arman Financial Services's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Arman Financial Services's EBIT margins were flat over the last year, revenue grew by a solid 33% to ₹1.3b. That's progress.

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

Arman Financial Services isn't a huge company, given its market capitalization of ₹4.8b. That makes it extra important to check on its balance sheet strength.

Are Arman Financial Services 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. As a result, I'm encouraged by the fact that insiders own Arman Financial Services shares worth a considerable sum. Indeed, they hold ₹1.5b worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 31% of the company, demonstrating a degree of high-level alignment with shareholders.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Arman Financial Services with market caps under ₹15b is about ₹4.2m.

The Arman Financial Services CEO received total compensation of only ₹2.0m in the year to . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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. I'd also argue reasonable pay levels attest to good decision making more generally.

Does Arman Financial Services Deserve A Spot On Your Watchlist?

One important encouraging feature of Arman Financial Services is that it is growing profits. Earnings growth might be the main game for Arman Financial Services, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. We should say that we've discovered 3 warning signs for Arman Financial Services (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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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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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