Here's Why Arihant Capital Markets (NSE:ARIHANTCAP) Has Caught The Eye Of Investors

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 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Arihant Capital Markets (NSE:ARIHANTCAP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Arihant Capital Markets with the means to add long-term value to shareholders.

View our latest analysis for Arihant Capital Markets

How Quickly Is Arihant Capital Markets Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Arihant Capital Markets has managed to grow EPS by 26% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Our analysis has highlighted that Arihant Capital Markets' revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. EBIT margins for Arihant Capital Markets remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 32% to ₹1.9b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Arihant Capital Markets isn't a huge company, given its market capitalisation of ₹6.0b. That makes it extra important to check on its balance sheet strength.

Are Arihant Capital Markets 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 we're pleased to report that Arihant Capital Markets insiders own a meaningful share of the business. Indeed, with a collective holding of 77%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about ₹4.6b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Does Arihant Capital Markets Deserve A Spot On Your Watchlist?

You can't deny that Arihant Capital Markets has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Arihant Capital Markets' continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. You should always think about risks though. Case in point, we've spotted 3 warning signs for Arihant Capital Markets you should be aware of.

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.