Do Aristo Bio-Tech and Lifescience's (NSE:ARISTO) Earnings Warrant Your Attention?

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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Aristo Bio-Tech and Lifescience (NSE:ARISTO). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Aristo Bio-Tech and Lifescience with the means to add long-term value to shareholders.

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Aristo Bio-Tech and Lifescience's Earnings Per Share Are Growing

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. Recognition must be given to the that Aristo Bio-Tech and Lifescience has grown EPS by 51% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. While we note Aristo Bio-Tech and Lifescience achieved similar EBIT margins to last year, revenue grew by a solid 47% to ₹3.3b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

View our latest analysis for Aristo Bio-Tech and Lifescience

Aristo Bio-Tech and Lifescience isn't a huge company, given its market capitalisation of ₹626m. That makes it extra important to check on its balance sheet strength.

Are Aristo Bio-Tech and Lifescience Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Aristo Bio-Tech and Lifescience insiders own a meaningful share of the business. To be exact, company insiders hold 73% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Of course, Aristo Bio-Tech and Lifescience is a very small company, with a market cap of only ₹626m. So despite a large proportional holding, insiders only have ₹460m worth of stock. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Should You Add Aristo Bio-Tech and Lifescience To Your Watchlist?

Aristo Bio-Tech and Lifescience's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Aristo Bio-Tech and Lifescience very closely. However, before you get too excited we've discovered 3 warning signs for Aristo Bio-Tech and Lifescience (2 are a bit unpleasant!) that you should be aware of.

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 tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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.