With EPS Growth And More, Jammu and Kashmir Bank (NSE:J&KBANK) Makes An Interesting Case

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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Jammu and Kashmir Bank (NSE:J&KBANK). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Jammu and Kashmir Bank

How Fast Is Jammu and Kashmir Bank Growing Its Earnings Per Share?

In the last three years Jammu and Kashmir Bank's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Jammu and Kashmir Bank's EPS grew from ₹5.96 to ₹11.44, over the previous 12 months. It's a rarity to see 92% year-on-year growth like that. That could be a sign that the business has reached a true inflection point.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that Jammu and Kashmir Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Jammu and Kashmir Bank achieved similar EBIT margins to last year, revenue grew by a solid 33% to ₹54b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Jammu and Kashmir Bank Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to Jammu and Kashmir Bank, with market caps between ₹33b and ₹131b, is around ₹32m.

Jammu and Kashmir Bank's CEO only received compensation totalling ₹3.2m in the year to March 2022. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is Jammu and Kashmir Bank Worth Keeping An Eye On?

Jammu and Kashmir Bank's earnings have taken off in quite an impressive fashion. This appreciable increase in earnings could be a sign of an upward trajectory for the company. What's more, the fact that the CEO's compensation is quite reasonable is a sign that the company is conscious of excessive spending. It will definitely require further research to be sure, but it does seem that Jammu and Kashmir Bank has the hallmarks of a quality business; and that would make it well worth watching. What about risks? Every company has them, and we've spotted 2 warning signs for Jammu and Kashmir Bank you should know about.

The beauty of investing is that you can invest in almost 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. 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.