With EPS Growth And More, Giriraj Civil Developers (NSE:GIRIRAJ) 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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like 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.

See our latest analysis for Giriraj Civil Developers

How Quickly Is Giriraj Civil Developers Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Giriraj Civil Developers' EPS has grown 37% each year, compound, over three years. So it's not surprising to see the company trades on a very high multiple of (past) earnings.

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. Giriraj Civil Developers shareholders can take confidence from the fact that EBIT margins are up from 7.3% to 9.9%, 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 Giriraj Civil Developers is no giant, with a market capitalisation of ₹9.5b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Giriraj Civil Developers Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's pleasing to note that insiders spent ₹241m buying Giriraj Civil Developers shares, over the last year, without reporting any share sales whatsoever. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. It is also worth noting that it was MD & Chairman Krushang Shah who made the biggest single purchase, worth ₹116m, paying ₹116 per share.

On top of the insider buying, we can also see that Giriraj Civil Developers insiders own a large chunk of the company. To be exact, company insiders hold 68% 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 ₹6.5b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Giriraj Civil Developers' CEO, Krushang Shah, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations under ₹17b, like Giriraj Civil Developers, the median CEO pay is around ₹3.2m.

The Giriraj Civil Developers CEO received total compensation of only ₹2.4m in the year to March 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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 Giriraj Civil Developers To Your Watchlist?

You can't deny that Giriraj Civil Developers has grown its earnings per share at a very impressive rate. That's attractive. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. Astute investors will want to keep this stock on watch. You should always think about risks though. Case in point, we've spotted 3 warning signs for Giriraj Civil Developers you should be aware of, and 2 of them are potentially serious.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Giriraj Civil Developers, you'll probably love this curated collection of companies in IN that have an attractive valuation 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.

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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.

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