If You Like EPS Growth Then Check Out Coral India Finance and Housing (NSE:CORALFINAC) Before It's Too Late

By
Simply Wall St
Published
April 14, 2022
NSEI:CORALFINAC
Source: Shutterstock

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 completely 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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Coral India Finance and Housing (NSE:CORALFINAC). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Coral India Finance and Housing

How Quickly Is Coral India Finance and Housing Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Coral India Finance and Housing has grown EPS by 35% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. Not all of Coral India Finance and Housing's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Coral India Finance and Housing's EBIT margins were flat over the last year, revenue grew by a solid 104% to ₹251m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history
NSEI:CORALFINAC Earnings and Revenue History April 14th 2022

Since Coral India Finance and Housing is no giant, with a market capitalization of ₹1.8b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Coral India Finance and Housing Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Coral India Finance and Housing insiders own a significant number of shares certainly appeals to me. In fact, they own 63% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me 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 ₹1.1b invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Does Coral India Finance and Housing Deserve A Spot On Your Watchlist?

For growth investors like me, Coral India Finance and Housing's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. We don't want to rain on the parade too much, but we did also find 3 warning signs for Coral India Finance and Housing that you need to be mindful of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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

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