With EPS Growth And More, Aarvi Encon (NSE:AARVI) Makes An Interesting Case

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. 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.

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 Aarvi Encon (NSE:AARVI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Aarvi Encon with the means to add long-term value to shareholders.

View our latest analysis for Aarvi Encon

How Quickly Is Aarvi Encon Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Aarvi Encon grew its EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.

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 Aarvi Encon achieved similar EBIT margins to last year, revenue grew by a solid 43% to ₹2.9b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Since Aarvi Encon is no giant, with a market capitalisation of ₹1.4b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Aarvi Encon 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 as you can imagine, the fact that Aarvi Encon insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 73% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Valued at only ₹1.4b Aarvi Encon is really small for a listed company. That means insiders only have ₹1.1b worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is Aarvi Encon Worth Keeping An Eye On?

As previously touched on, Aarvi Encon is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. You still need to take note of risks, for example - Aarvi Encon has 3 warning signs (and 1 which can't be ignored) we think you should know about.

Although Aarvi Encon certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.