Do Giriraj Civil Developers' (NSE:GIRIRAJ) Earnings Warrant Your Attention?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Giriraj Civil Developers (NSE:GIRIRAJ). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

We've discovered 3 warning signs about Giriraj Civil Developers. View them for free.

Giriraj Civil Developers' 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. Shareholders will be happy to know that Giriraj Civil Developers' EPS has grown 25% each year, compound, over three years. This has no doubt fuelled the optimism that sees the stock trading on a high multiple of earnings.

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. While we note Giriraj Civil Developers achieved similar EBIT margins to last year, revenue grew by a solid 89% to ₹2.0b. That's encouraging news for the company!

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.

View our latest analysis for Giriraj Civil Developers

Since Giriraj Civil Developers is no giant, with a market capitalisation of ₹8.9b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Giriraj Civil Developers Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So those who are interested in Giriraj Civil Developers will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 59% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. With that sort of holding, insiders have about ₹5.2b riding on the stock, at current prices. So there's plenty there to keep them focused!

Does Giriraj Civil Developers Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Giriraj Civil Developers' strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Before you take the next step you should know about the 3 warning signs for Giriraj Civil Developers that we have uncovered.

Although Giriraj Civil Developers certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.