If You Like EPS Growth Then Check Out Dolat Investments (NSE:DOLAT) Before It's Too Late

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Dolat Investments (NSE:DOLAT). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Dolat Investments

How Fast Is Dolat Investments Growing Its Earnings Per Share?

In the last three years Dolat Investments's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Dolat Investments's EPS shot from ₹4.52 to ₹9.70, over the last year. You don't see 115% year-on-year growth like that, very often. That could be a sign that the business has reached a true inflection point.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that Dolat Investments's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Dolat Investments maintained stable EBIT margins over the last year, all while growing revenue 89% to ₹2.9b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Since Dolat Investments is no giant, with a market capitalization of ₹16b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Dolat Investments Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Dolat Investments insiders have a significant amount of capital invested in the stock. Indeed, they hold ₹2.5b worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 16% 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? A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Dolat Investments with market caps between ₹7.4b and ₹30b is about ₹14m.

The CEO of Dolat Investments only received ₹6.0m in total compensation for the year ending . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is Dolat Investments Worth Keeping An Eye On?

Dolat Investments's earnings per share have taken off like a rocket aimed right at the moon. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. Big growth can make big winners, so I do think Dolat Investments is worth considering carefully. You should always think about risks though. Case in point, we've spotted 1 warning sign for Dolat Investments you should be aware of.

Although Dolat Investments certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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.

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