Here's Why We Think Crest Ventures (NSE:CREST) Might Deserve Your Attention Today

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

In contrast to all that, many investors prefer to focus on companies like Crest Ventures (NSE:CREST), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Crest Ventures

How Fast Is Crest Ventures Growing Its Earnings Per Share?

In the last three years Crest Ventures' 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. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Crest Ventures' EPS grew from ₹12.37 to ₹36.72, over the previous 12 months. It's not often a company can achieve year-on-year growth of 197%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Crest Ventures' 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. The good news is that Crest Ventures is growing revenues, and EBIT margins improved by 14.2 percentage points to 69%, over the last year. Both of which are great metrics to check off for potential growth.

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.

Since Crest Ventures is no giant, with a market capitalisation of ₹15b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Crest Ventures Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Crest Ventures 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 ₹1.2b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 8.2% of the company, demonstrating a degree of high-level alignment with shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Crest Ventures with market caps between ₹8.4b and ₹33b is about ₹15m.

The CEO of Crest Ventures was paid just ₹4.3m in total compensation for the year ending March 2023. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Crest Ventures To Your Watchlist?

Crest Ventures' earnings have taken off in quite an impressive fashion. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Crest Ventures certainly ticks a few boxes, so we think it's probably well worth further consideration. What about risks? Every company has them, and we've spotted 1 warning sign for Crest Ventures you should know about.

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 tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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.