We Ran A Stock Scan For Earnings Growth And KEI Industries (NSE:KEI) Passed With Ease

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like KEI Industries (NSE:KEI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for KEI Industries

How Fast Is KEI Industries Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, KEI Industries has grown EPS by 29% per year, compound, in the last three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month 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. While we note KEI Industries achieved similar EBIT margins to last year, revenue grew by a solid 17% to ₹81b. That's a real positive.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for KEI Industries' future EPS 100% free.

Are KEI Industries Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that KEI Industries insiders have a significant amount of capital invested in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at ₹73b. Coming in at 19% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

Should You Add KEI Industries To Your Watchlist?

For growth investors, KEI Industries' raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in KEI Industries' continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing KEI Industries' ROE with industry peers (and the market at large).

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.