Does Karur Vysya Bank (NSE:KARURVYSYA) Deserve A Spot On Your Watchlist?

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. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Karur Vysya Bank (NSE:KARURVYSYA). 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.

View our latest analysis for Karur Vysya Bank

How Fast Is Karur Vysya Bank Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. We can see that in the last three years Karur Vysya Bank grew its EPS by 14% per year. That growth rate is fairly good, assuming the company can keep it up.

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 I've used might not be the best representation of the underlying business. While we note Karur Vysya Bank's EBIT margins were flat over the last year, revenue grew by a solid 27% to ₹26b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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

Are Karur Vysya Bank Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Over the last 12 months Karur Vysya Bank insiders spent ₹5.4m more buying shares than they received from selling them. Although I don't particularly like to see selling, the fact that they put more capital in, than they extracted, is a positive in my mind.

The good news, alongside the insider buying, for Karur Vysya Bank bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have ₹2.9b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 9.2% of the company; visible skin in the game.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Ramesh Boddu is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations between ₹15b and ₹59b, like Karur Vysya Bank, the median CEO pay is around ₹24m.

The CEO of Karur Vysya Bank only received ₹9.5m in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. 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. It can also be a sign of a culture of integrity, in a broader sense.

Does Karur Vysya Bank Deserve A Spot On Your Watchlist?

As I already mentioned, Karur Vysya Bank is a growing business, which is what I like to see. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Karur Vysya Bank (1 doesn't sit too well with us) you should be aware of.

The good news is that Karur Vysya Bank is not the only growth stock with insider buying. Here's a list of them... 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.
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