Do Veekayem Fashion And Apparels' (NSE:VEEKAYEM) Earnings Warrant Your Attention?

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 Veekayem Fashion And Apparels (NSE:VEEKAYEM). 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.

See our latest analysis for Veekayem Fashion And Apparels

How Fast Is Veekayem Fashion And Apparels Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Veekayem Fashion And Apparels has achieved impressive annual EPS growth of 60%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Veekayem Fashion And Apparels achieved similar EBIT margins to last year, revenue grew by a solid 3.7% to ₹2.4b. That's progress.

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.

Veekayem Fashion And Apparels isn't a huge company, given its market capitalisation of ₹1.1b. That makes it extra important to check on its balance sheet strength.

Are Veekayem Fashion And Apparels 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 those who are interested in Veekayem Fashion And Apparels will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 73% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Of course, Veekayem Fashion And Apparels is a very small company, with a market cap of only ₹1.1b. So this large proportion of shares owned by insiders only amounts to ₹787m. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for 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. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations under ₹17b, like Veekayem Fashion And Apparels, the median CEO pay is around ₹3.2m.

Veekayem Fashion And Apparels' CEO only received compensation totalling ₹1.2m in the year to March 2023. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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 good governance, more generally.

Is Veekayem Fashion And Apparels Worth Keeping An Eye On?

Veekayem Fashion And Apparels' earnings per share growth have been climbing higher at an appreciable rate. 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 Veekayem Fashion And Apparels is worth considering carefully. You should always think about risks though. Case in point, we've spotted 2 warning signs for Veekayem Fashion And Apparels you should be aware of, and 1 of them can't be ignored.

Although Veekayem Fashion And Apparels 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.