With EPS Growth And More, AuSom Enterprise (NSE:AUSOMENT) Makes An Interesting Case

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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like AuSom Enterprise (NSE:AUSOMENT), which has not only revenues, but also profits. 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.

We've discovered 3 warning signs about AuSom Enterprise. View them for free.

AuSom Enterprise's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years AuSom Enterprise grew its EPS by 10% per year. That's a good rate of growth, if it can be sustained.

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. While we note AuSom Enterprise achieved similar EBIT margins to last year, revenue grew by a solid 298% to ₹16b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

See our latest analysis for AuSom Enterprise

Since AuSom Enterprise is no giant, with a market capitalisation of ₹1.3b, you should definitely check its cash and debt before getting too excited about its prospects.

Are AuSom Enterprise 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 as you can imagine, the fact that AuSom Enterprise insiders own a significant number of shares certainly is appealing. In fact, they own 79% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Valued at only ₹1.3b AuSom Enterprise is really small for a listed company. That means insiders only have ₹1.0b worth of shares, despite the large proportional holding. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like AuSom Enterprise with market caps under ₹17b is about ₹3.6m.

The CEO of AuSom Enterprise was paid just ₹6.0k in total compensation for the year ending March 2024. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does AuSom Enterprise Deserve A Spot On Your Watchlist?

One important encouraging feature of AuSom Enterprise is that it is growing profits. The fact that EPS is growing is a genuine positive for AuSom Enterprise, but the pleasant picture gets better than that. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. Still, you should learn about the 3 warning signs we've spotted with AuSom Enterprise (including 1 which is concerning).

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

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.