We Ran A Stock Scan For Earnings Growth And Usha Martin Education & Solutions (NSE:UMESLTD) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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 Usha Martin Education & Solutions (NSE:UMESLTD). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Usha Martin Education & Solutions with the means to add long-term value to shareholders.

Check out our latest analysis for Usha Martin Education & Solutions

Usha Martin Education & Solutions' Improving Profits

Usha Martin Education & Solutions has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Usha Martin Education & Solutions' EPS shot from ₹0.0095 to ₹0.023, over the last year. It's not often a company can achieve year-on-year growth of 140%. 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. Usha Martin Education & Solutions maintained stable EBIT margins over the last year, all while growing revenue 33% to ₹7.8m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Usha Martin Education & Solutions isn't a huge company, given its market capitalisation of ₹137m. That makes it extra important to check on its balance sheet strength.

Are Usha Martin Education & Solutions Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to Usha Martin Education & Solutions, with market caps under ₹16b is around ₹3.0m.

The CEO of Usha Martin Education & Solutions was paid just ₹1.3m in total compensation for the year ending March 2021. 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 good governance, more generally.

Should You Add Usha Martin Education & Solutions To Your Watchlist?

Usha Martin Education & Solutions' earnings per share have been soaring, with growth rates sky high. Such fast EPS growth prompts the question: has the business reached an inflection point? What's more, the fact that the CEO's compensation is quite reasonable is a sign that the company is conscious of excessive spending. It will definitely require further research to be sure, but it does seem that Usha Martin Education & Solutions has the hallmarks of a quality business; and that would make it well worth watching. Even so, be aware that Usha Martin Education & Solutions is showing 4 warning signs in our investment analysis , and 2 of those are significant...

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.