Here's Why Aurangabad Distillery (NSE:AURDIS) Has Caught The Eye Of Investors

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Aurangabad Distillery (NSE:AURDIS). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Aurangabad Distillery

Aurangabad Distillery's Improving Profits

Over the last three years, Aurangabad Distillery has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Aurangabad Distillery boosted its trailing twelve month EPS from ₹16.35 to ₹20.41, in the last year. There's little doubt shareholders would be happy with that 25% gain.

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. While we note Aurangabad Distillery achieved similar EBIT margins to last year, revenue grew by a solid 10% to ₹1.3b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Aurangabad Distillery isn't a huge company, given its market capitalisation of ₹3.8b. That makes it extra important to check on its balance sheet strength.

Are Aurangabad Distillery Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So those who are interested in Aurangabad Distillery will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 60% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. To give you an idea, the value of insiders' holdings in the business are valued at ₹2.3b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are 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 Aurangabad Distillery with market caps under ₹17b is about ₹3.4m.

Aurangabad Distillery's CEO only received compensation totalling ₹837k in the year to March 2024. 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. It can also be a sign of good governance, more generally.

Does Aurangabad Distillery Deserve A Spot On Your Watchlist?

One positive for Aurangabad Distillery is that it is growing EPS. That's nice to see. The fact that EPS is growing is a genuine positive for Aurangabad Distillery, but the pleasant picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. We don't want to rain on the parade too much, but we did also find 4 warning signs for Aurangabad Distillery (3 are a bit concerning!) that you need to be mindful of.

Although Aurangabad Distillery certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.