With EPS Growth And More, Edelweiss Financial Services (NSE:EDELWEISS) Makes An Interesting Case

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Edelweiss Financial Services (NSE:EDELWEISS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Edelweiss Financial Services with the means to add long-term value to shareholders.

Check out our latest analysis for Edelweiss Financial Services

Edelweiss Financial Services' Improving Profits

In the last three years Edelweiss 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. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Edelweiss Financial Services' EPS shot from ₹2.64 to ₹4.46, over the last year. Year on year growth of 69% is certainly a sight to behold. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Edelweiss Financial Services' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Edelweiss Financial Services achieved similar EBIT margins to last year, revenue grew by a solid 28% to ₹54b. 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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Edelweiss Financial Services' balance sheet strength, before getting too excited.

Are Edelweiss Financial Services Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Over the last 12 months Edelweiss Financial Services insiders spent ₹5.8m more buying shares than they received from selling them. Shareholders who may have questioned insiders selling will find some reassurance in this fact. It is also worth noting that it was Co-Founder Venkatchalam Ramaswamy who made the biggest single purchase, worth ₹100m, paying ₹68.68 per share.

On top of the insider buying, it's good to see that Edelweiss Financial Services insiders have a valuable investment in the business. We note that their impressive stake in the company is worth ₹24b. That equates to 33% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Does Edelweiss Financial Services Deserve A Spot On Your Watchlist?

Edelweiss Financial Services' earnings per share growth have been climbing higher at an appreciable rate. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Edelweiss Financial Services belongs near the top of your watchlist. Still, you should learn about the 2 warning signs we've spotted with Edelweiss Financial Services (including 1 which is potentially serious).

Keen growth investors love to see insider buying. Thankfully, Edelweiss Financial Services isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by recent insider buying.

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.