With EPS Growth And More, Asahi India Glass (NSE:ASAHIINDIA) Is Interesting

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. 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.

In contrast to all that, I prefer to spend time on companies like Asahi India Glass (NSE:ASAHIINDIA), 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.

Check out our latest analysis for Asahi India Glass

How Fast Is Asahi India Glass Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Asahi India Glass has grown EPS by 15% per year. That growth rate is fairly good, assuming the company can keep it up.

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). The good news is that Asahi India Glass is growing revenues, and EBIT margins improved by 6.8 percentage points to 18%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Asahi India Glass's balance sheet strength, before getting too excited.

Are Asahi India Glass 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. So it is good to see that Asahi India Glass insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth ₹26b. Coming in at 19% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

Is Asahi India Glass Worth Keeping An Eye On?

One important encouraging feature of Asahi India Glass is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Asahi India Glass that you should be aware of.

Although Asahi India Glass 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.

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.