We Ran A Stock Scan For Earnings Growth And Krishna Defence and Allied Industries (NSE:KRISHNADEF) Passed With Ease

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Krishna Defence and Allied Industries (NSE:KRISHNADEF), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Krishna Defence and Allied Industries

How Quickly Is Krishna Defence and Allied Industries Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Krishna Defence and Allied Industries' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 48%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. EBIT margins for Krishna Defence and Allied Industries remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 67% to ₹1.1b. 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.

Krishna Defence and Allied Industries isn't a huge company, given its market capitalisation of ₹8.1b. That makes it extra important to check on its balance sheet strength.

Are Krishna Defence and Allied Industries 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 we're pleased to report that Krishna Defence and Allied Industries insiders own a meaningful share of the business. In fact, they own 51% 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. To give you an idea, the value of insiders' holdings in the business are valued at ₹4.1b at the current share price. That's nothing to sneeze at!

Should You Add Krishna Defence and Allied Industries To Your Watchlist?

Krishna Defence and Allied Industries' earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Krishna Defence and Allied Industries very closely. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Krishna Defence and Allied Industries (at least 2 which are a bit unpleasant) , and understanding these should be part of your investment process.

Although Krishna Defence and Allied Industries 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.