Here's Why Karur Vysya Bank (NSE:KARURVYSYA) Has Caught The Eye Of Investors

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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). 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 Karur Vysya Bank

Karur Vysya Bank's Improving Profits

Karur Vysya Bank has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Karur Vysya Bank's EPS skyrocketed from ₹8.42 to ₹13.79, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 64%.

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 Karur Vysya Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. 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 25% to ₹35b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. 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 should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Karur Vysya Bank insiders have a significant amount of capital invested in the stock. To be specific, they have ₹4.0b worth of shares. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 4.8%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between ₹33b and ₹132b, like Karur Vysya Bank, the median CEO pay is around ₹33m.

Karur Vysya Bank's CEO took home a total compensation package worth ₹21m in the year leading up 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Karur Vysya Bank Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Karur Vysya Bank's strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the key takeaway is that Karur Vysya Bank is worth keeping an eye on. Even so, be aware that Karur Vysya Bank is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

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.