We Ran A Stock Scan For Earnings Growth And Airo Lam (NSE:AIROLAM) Passed With Ease

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Airo Lam (NSE:AIROLAM). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Airo Lam

How Quickly Is Airo Lam Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Airo Lam's EPS has grown 20% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. EBIT margins for Airo Lam remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.8% to ₹2.0b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Since Airo Lam is no giant, with a market capitalisation of ₹2.1b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Airo Lam 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Not only did Airo Lam insiders refrain from selling stock during the year, but they also spent ₹4.5m buying it. This is a good look for the company as it paints an optimistic picture for the future. We also note that it was the Chairman & MD, Pravin Kumar Patel, who made the biggest single acquisition, paying ₹1.7m for shares at about ₹82.46 each.

It's reassuring that Airo Lam insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. To be specific, the CEO is paid modestly when compared to company peers of the same size. Our analysis has discovered that the median total compensation for the CEOs of companies like Airo Lam with market caps under ₹17b is about ₹3.3m.

The Airo Lam CEO received total compensation of only ₹1.1m in the year to March 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Airo Lam Deserve A Spot On Your Watchlist?

For growth investors, Airo Lam's raw rate of earnings growth is a beacon in the night. To add to the positives, Airo Lam has recorded instances of insider buying and a modest executive pay to boot. All in all, this stock is worth the time to delve deeper into the details. Before you take the next step you should know about the 2 warning signs for Airo Lam (1 is concerning!) that we have uncovered.

The good news is that Airo Lam is not the only growth stock with insider buying. Here's a list of growth-focused companies in IN with insider buying in the last three months!

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.