We Ran A Stock Scan For Earnings Growth And Subros (NSE:SUBROS) Passed With Ease

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 currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Subros (NSE:SUBROS), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Subros

How Quickly Is Subros Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Recognition must be given to the that Subros has grown EPS by 47% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Subros remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 10% to ₹33b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Subros' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Subros Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Subros followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have ₹3.2b worth of shares. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 8.6% of the shares on issue for the business, an appreciable amount considering the market cap.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Subros, with market caps between ₹17b and ₹69b, is around ₹23m.

Subros offered total compensation worth ₹13m to its CEO in the year to March 2024. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does Subros Deserve A Spot On Your Watchlist?

Subros' earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The strong EPS improvement suggests the businesses is humming along. Subros certainly ticks a few boxes, so we think it's probably well worth further consideration. You still need to take note of risks, for example - Subros has 1 warning sign we think you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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.