Do Karur Vysya Bank's (NSE:KARURVYSYA) Earnings Warrant Your Attention?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Karur Vysya Bank (NSE:KARURVYSYA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Karur Vysya Bank with the means to add long-term value to shareholders.

View our latest analysis for Karur Vysya Bank

Karur Vysya Bank's Improving Profits

Over the last three years, Karur Vysya Bank has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Karur Vysya Bank's EPS grew from ₹7.06 to ₹12.25, over the previous 12 months. It's not often a company can achieve year-on-year growth of 74%.

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. Not all of Karur Vysya Bank's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Karur Vysya Bank remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 17% to ₹32b. That's a real positive.

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

Are Karur Vysya Bank 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. Karur Vysya Bank followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. As a matter of fact, their holding is valued at ₹4.0b. That's a lot of money, and no small incentive to work hard. Despite being just 4.8% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Karur Vysya Bank, with market caps between ₹33b and ₹131b, is around ₹34m.

Karur Vysya Bank offered total compensation worth ₹21m to its CEO in the year to March 2022. That is actually below the median for CEO's of similarly sized companies. 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.

Should You Add Karur Vysya Bank To Your Watchlist?

Karur Vysya Bank's earnings have taken off in quite an impressive fashion. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The strong EPS improvement suggests the businesses is humming along. Big growth can make big winners, so the writing on the wall tells us that Karur Vysya Bank is worth considering carefully. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Karur Vysya Bank that you should be aware of.

Although Karur Vysya Bank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.