We Ran A Stock Scan For Earnings Growth And Reliable Data Services (NSE:RELIABLE) 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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Reliable Data Services (NSE:RELIABLE), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is Reliable Data Services Growing Its Earnings Per Share?

Over the last three years, Reliable Data Services has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Reliable Data Services' EPS shot from ₹4.62 to ₹7.97, over the last year. It's a rarity to see 73% year-on-year growth like that. That could be a sign that the business has reached a true 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. Reliable Data Services maintained stable EBIT margins over the last year, all while growing revenue 37% to ₹1.1b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

View our latest analysis for Reliable Data Services

Since Reliable Data Services is no giant, with a market capitalisation of ₹786m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Reliable Data Services Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Reliable Data Services insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 73%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, Reliable Data Services is a very small company, with a market cap of only ₹786m. So despite a large proportional holding, insiders only have ₹572m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations under ₹17b, like Reliable Data Services, the median CEO pay is around ₹3.6m.

The CEO of Reliable Data Services was paid just ₹1.3m in total compensation for the year ending March 2024. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Is Reliable Data Services Worth Keeping An Eye On?

Reliable Data Services' earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so the writing on the wall tells us that Reliable Data Services is worth considering carefully. We don't want to rain on the parade too much, but we did also find 3 warning signs for Reliable Data Services (2 are potentially serious!) that you need to be mindful of.

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.