If EPS Growth Is Important To You, Donear Industries (NSE:DONEAR) Presents An Opportunity

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.' 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.

In contrast to all that, many investors prefer to focus on companies like Donear Industries (NSE:DONEAR), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Donear Industries with the means to add long-term value to shareholders.

Check out our latest analysis for Donear Industries

Donear Industries' Improving Profits

In the last three years Donear Industries' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, Donear Industries' EPS soared from ₹6.11 to ₹8.16, over the last year. That's a commendable gain of 34%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Donear Industries maintained stable EBIT margins over the last year, all while growing revenue 11% to ₹8.6b. 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.

Since Donear Industries is no giant, with a market capitalisation of ₹8.4b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Donear 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 as you can imagine, the fact that Donear Industries insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 60% 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. To give you an idea, the value of insiders' holdings in the business are valued at ₹5.0b at the current share price. That's nothing to sneeze at!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Donear Industries with market caps under ₹17b is about ₹3.6m.

The CEO of Donear Industries was paid just ₹3.1m 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. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is Donear Industries Worth Keeping An Eye On?

You can't deny that Donear Industries has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the key takeaway is that Donear Industries is worth keeping an eye on. You should always think about risks though. Case in point, we've spotted 3 warning signs for Donear Industries you should be aware of, and 1 of them shouldn't be ignored.

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.