Here's Why We Think Arman Financial Services (NSE:ARMANFIN) Might Deserve Your Attention Today

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 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 Arman Financial Services (NSE:ARMANFIN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Arman Financial Services with the means to add long-term value to shareholders.

Check out our latest analysis for Arman Financial Services

How Fast Is Arman Financial Services Growing Its Earnings Per Share?

In the last three years Arman Financial Services' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Arman Financial Services boosted its trailing twelve month EPS from ₹139 to ₹157, in the last year. This amounts to a 13% gain; a figure that shareholders will be pleased to see.

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. Not all of Arman Financial Services' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Arman Financial Services remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 33% to ₹3.3b. That's a real positive.

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.

Since Arman Financial Services is no giant, with a market capitalisation of ₹14b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Arman Financial Services 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. Arman Financial Services followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have ₹3.3b worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 24% of the company; visible skin in the game.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Arman Financial Services with market caps between ₹8.4b and ₹34b is about ₹15m.

The Arman Financial Services CEO received total compensation of only ₹2.1m in the year to March 2024. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Arman Financial Services To Your Watchlist?

One positive for Arman Financial Services is that it is growing EPS. That's nice to see. The growth of EPS may be the eye-catching headline for Arman Financial Services, but there's more to bring joy for shareholders. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. What about risks? Every company has them, and we've spotted 2 warning signs for Arman Financial Services (of which 1 is concerning!) you should know about.

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.