Here's Why We Think A B Infrabuild (NSE:ABINFRA) Might Deserve Your Attention Today

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like A B Infrabuild (NSE:ABINFRA), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide A B Infrabuild with the means to add long-term value to shareholders.

See our latest analysis for A B Infrabuild

How Fast Is A B Infrabuild Growing Its Earnings Per Share?

A B Infrabuild 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. A B Infrabuild's EPS skyrocketed from ₹3.07 to ₹4.04, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 32%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of A B Infrabuild shareholders is that EBIT margins have grown from 9.8% to 13% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

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.

Since A B Infrabuild is no giant, with a market capitalisation of ₹2.3b, you should definitely check its cash and debt before getting too excited about its prospects.

Are A B Infrabuild Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

One gleaming positive for A B Infrabuild, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, in one large transaction Chairman & MD Amit Mishra paid ₹45m, for stock at ₹10.79 per share. Big insider buys like that are a rarity and should prompt discussion on the merits of the business.

And the insider buying isn't the only sign of alignment between shareholders and the board, since A B Infrabuild insiders own more than a third of the company. Indeed, with a collective holding of 85%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about ₹1.9b riding on the stock, at current prices. That's nothing to sneeze at!

Is A B Infrabuild Worth Keeping An Eye On?

For growth investors, A B Infrabuild's raw rate of earnings growth is a beacon in the night. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with A B Infrabuild (at least 2 which are concerning) , and understanding these should be part of your investment process.

Keen growth investors love to see insider buying. Thankfully, A B Infrabuild isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by recent insider buying.

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.