Here's Why We Think Narayana Hrudayalaya (NSE:NH) Might Deserve Your Attention Today

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

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 Narayana Hrudayalaya (NSE:NH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Narayana Hrudayalaya with the means to add long-term value to shareholders.

View our latest analysis for Narayana Hrudayalaya

Narayana Hrudayalaya's Improving Profits

Over the last three years, Narayana Hrudayalaya 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. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, Narayana Hrudayalaya's EPS catapulted from ₹18.55 to ₹33.47, over the last year. It's a rarity to see 80% year-on-year growth like that.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The music to the ears of Narayana Hrudayalaya shareholders is that EBIT margins have grown from 14% to 18% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Narayana Hrudayalaya's future profits.

Are Narayana Hrudayalaya Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Narayana Hrudayalaya will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 65% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. That level of investment from insiders is nothing to sneeze at.

Does Narayana Hrudayalaya Deserve A Spot On Your Watchlist?

Narayana Hrudayalaya's earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Narayana Hrudayalaya is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Of course, just because Narayana Hrudayalaya is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.