Stock Analysis

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

NSEI:KRISHNADEF
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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.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Krishna Defence and Allied Industries (NSE:KRISHNADEF). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Krishna Defence and Allied Industries

How Fast Is Krishna Defence and Allied Industries Growing Its Earnings Per Share?

Krishna Defence and Allied Industries has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Krishna Defence and Allied Industries' EPS shot from ₹5.46 to ₹13.08, over the last year. It's a rarity to see 139% year-on-year growth like that. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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. Krishna Defence and Allied Industries shareholders can take confidence from the fact that EBIT margins are up from 11% to 14%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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:KRISHNADEF Earnings and Revenue History December 10th 2024

Krishna Defence and Allied Industries isn't a huge company, given its market capitalisation of ₹9.8b. That makes it extra important to check on its balance sheet strength.

Are Krishna Defence and Allied Industries 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 we're pleased to report that Krishna Defence and Allied Industries insiders own a meaningful share of the business. To be exact, company insiders hold 51% 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. In terms of absolute value, insiders have ₹5.0b invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

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 EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. 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. So based on this quick analysis, we do think it's worth considering Krishna Defence and Allied Industries for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Krishna Defence and Allied Industries you should be aware of, and 1 of them is a bit concerning.

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.

Valuation is complex, but we're here to simplify it.

Discover if Krishna Defence and Allied Industries might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.