If EPS Growth Is Important To You, Veekayem Fashion And Apparels (NSE:VEEKAYEM) Presents An Opportunity

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

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Veekayem Fashion And Apparels (NSE:VEEKAYEM). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Veekayem Fashion And Apparels

How Fast Is Veekayem Fashion And Apparels Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Veekayem Fashion And Apparels' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 43%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. EBIT margins for Veekayem Fashion And Apparels remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 24% to ₹2.3b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Veekayem Fashion And Apparels isn't a huge company, given its market capitalisation of ₹455m. 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 as you can imagine, the fact that Veekayem Fashion And Apparels 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. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Valued at only ₹455m Veekayem Fashion And Apparels is really small for a listed company. So this large proportion of shares owned by insiders only amounts to ₹333m. 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. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations under ₹17b, like Veekayem Fashion And Apparels, the median CEO pay is around ₹3.3m.

Veekayem Fashion And Apparels' CEO only received compensation totalling ₹1.2m in the year to March 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Veekayem Fashion And Apparels To Your Watchlist?

Veekayem Fashion And Apparels' earnings per share have been soaring, with growth rates sky high. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The sharp increase in earnings could signal good business momentum. Veekayem Fashion And Apparels is certainly doing some things right and is well worth investigating. You still need to take note of risks, for example - Veekayem Fashion And Apparels has 3 warning signs we think you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.