We Ran A Stock Scan For Earnings Growth And Ahluwalia Contracts (India) (NSE:AHLUCONT) Passed With Ease

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Ahluwalia Contracts (India) (NSE:AHLUCONT). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Ahluwalia Contracts (India)

Ahluwalia Contracts (India)'s Improving Profits

In the last three years Ahluwalia Contracts (India)'s earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Ahluwalia Contracts (India)'s EPS shot up from ₹23.62 to ₹30.74; a result that's bound to keep shareholders happy. That's a impressive gain of 30%.

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. Ahluwalia Contracts (India) maintained stable EBIT margins over the last year, all while growing revenue 10.0% to ₹30b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Ahluwalia Contracts (India)'s forecast profits?

Are Ahluwalia Contracts (India) Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Ahluwalia Contracts (India) insiders own a meaningful share of the business. Indeed, with a collective holding of 55%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. And their holding is extremely valuable at the current share price, totalling ₹24b. That level of investment from insiders is nothing to sneeze at.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Ahluwalia Contracts (India) with market caps between ₹17b and ₹67b is about ₹24m.

Ahluwalia Contracts (India) offered total compensation worth ₹13m to its CEO in the year to March 2023. 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.

Should You Add Ahluwalia Contracts (India) To Your Watchlist?

You can't deny that Ahluwalia Contracts (India) has grown its earnings per share at a very impressive rate. That's attractive. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. The overarching message here is that Ahluwalia Contracts (India) has underlying strengths that make it worth a look at. Now, you could try to make up your mind on Ahluwalia Contracts (India) by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Ahluwalia Contracts (India) 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.