We Ran A Stock Scan For Earnings Growth And Arvee Laboratories (India) (NSE:ARVEE) Passed With Ease

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Arvee Laboratories (India) (NSE:ARVEE). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Arvee Laboratories (India)

Arvee Laboratories (India)'s Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Arvee Laboratories (India) has grown EPS by 8.5% per year. That's a pretty good rate, if the company can sustain it.

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 Arvee Laboratories (India) remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 3.6% to ₹494m. That's progress.

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.

Arvee Laboratories (India) isn't a huge company, given its market capitalisation of ₹1.0b. That makes it extra important to check on its balance sheet strength.

Are Arvee Laboratories (India) 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 those who are interested in Arvee Laboratories (India) will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 79% of the company, so their decisions have a significant impact on their investments. 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. Valued at only ₹1.0b Arvee Laboratories (India) is really small for a listed company. So despite a large proportional holding, insiders only have ₹824m 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.

Does Arvee Laboratories (India) Deserve A Spot On Your Watchlist?

As previously touched on, Arvee Laboratories (India) is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Arvee Laboratories (India) that you should be aware of.

Although Arvee Laboratories (India) certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.