We Ran A Stock Scan For Earnings Growth And Avadh Sugar & Energy (NSE:AVADHSUGAR) Passed With Ease

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Avadh Sugar & Energy (NSE:AVADHSUGAR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Avadh Sugar & Energy with the means to add long-term value to shareholders.

Check out our latest analysis for Avadh Sugar & Energy

Avadh Sugar & Energy's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Avadh Sugar & Energy has managed to grow EPS by 18% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Unfortunately, Avadh Sugar & Energy's revenue dropped 3.7% last year, but the silver lining is that EBIT margins improved from 7.3% to 10%. That falls short of ideal.

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 Avadh Sugar & Energy is no giant, with a market capitalisation of ₹11b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Avadh Sugar & Energy Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Avadh Sugar & Energy shares worth a considerable sum. Indeed, they hold ₹1.0b worth of its stock. This considerable investment should help drive long-term value in the business. Those holdings account for over 9.5% of the company; visible skin in the game.

Does Avadh Sugar & Energy Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Avadh Sugar & Energy's strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Still, you should learn about the 2 warning signs we've spotted with Avadh Sugar & Energy (including 1 which is a bit unpleasant).

Although Avadh Sugar & Energy 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.