If EPS Growth Is Important To You, A B Infrabuild (NSE:ABINFRA) Presents An Opportunity

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. 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 A B Infrabuild (NSE:ABINFRA). 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 A B Infrabuild

A B Infrabuild's Improving Profits

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. So it would be better to isolate the growth rate over the last year for our analysis. A B Infrabuild's EPS shot up from ₹3.07 to ₹4.04; a result that's bound to keep shareholders happy. That's a commendable gain of 32%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. A B Infrabuild shareholders can take confidence from the fact that EBIT margins are up from 9.8% to 13%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

Since A B Infrabuild is no giant, with a market capitalisation of ₹1.8b, you should definitely check its cash and debt before getting too excited about its prospects.

Are A B Infrabuild Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

One shining light for A B Infrabuild is the serious outlay one insider has made to buy shares, in the last year. Specifically, in one large transaction Chairman & MD Amit Mishra paid ₹45m, for stock at ₹10.79 per share. It doesn't get much better than that, in terms of large investments from insiders.

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. In fact, they own 85% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. 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. In terms of absolute value, insiders have ₹1.5b invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

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. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. So it's fair to say that this stock may well deserve a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 4 warning signs for A B Infrabuild (2 are a bit concerning) you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of A B Infrabuild, you'll probably love this curated collection of companies in IN that have witnessed growth alongside insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.