If You Like EPS Growth Then Check Out Aakash Exploration Services (NSE:AAKASH) 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 Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Aakash Exploration Services (NSE:AAKASH). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Aakash Exploration Services

How Fast Is Aakash Exploration Services Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Aakash Exploration Services has managed to grow EPS by 23% per year over three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Aakash Exploration Services's EBIT margins are flat but, of some concern, its revenue is actually down. And that does make me a little more cautious of the stock.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Aakash Exploration Services isn't a huge company, given its market capitalization of ₹2.6b. That makes it extra important to check on its balance sheet strength.

Are Aakash Exploration Services Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Aakash Exploration Services insiders own a significant number of shares certainly appeals to me. In fact, they own 97% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about ₹2.5b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is Aakash Exploration Services Worth Keeping An Eye On?

For growth investors like me, Aakash Exploration Services's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Even so, be aware that Aakash Exploration Services is showing 2 warning signs in our investment analysis , you should know about...

Although Aakash Exploration Services 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.

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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.
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