With EPS Growth And More, Oriental Hotels (NSE:ORIENTHOT) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Oriental Hotels (NSE:ORIENTHOT), 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 Oriental Hotels with the means to add long-term value to shareholders.

See our latest analysis for Oriental Hotels

Oriental Hotels' Improving Profits

Over the last three years, Oriental Hotels 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. So it would be better to isolate the growth rate over the last year for our analysis. Oriental Hotels' EPS skyrocketed from ₹1.88 to ₹2.86, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 52%.

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. While we note Oriental Hotels achieved similar EBIT margins to last year, revenue grew by a solid 15% to ₹4.0b. 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.

Oriental Hotels isn't a huge company, given its market capitalisation of ₹24b. That makes it extra important to check on its balance sheet strength.

Are Oriental Hotels Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Oriental Hotels insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at ₹7.2b, they have plenty of motivation to push the business to succeed. Amounting to 30% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.

Does Oriental Hotels Deserve A Spot On Your Watchlist?

You can't deny that Oriental Hotels has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Still, you should learn about the 1 warning sign we've spotted with Oriental Hotels.

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.