We Ran A Stock Scan For Earnings Growth And Asian Paints (NSE:ASIANPAINT) 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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Asian Paints (NSE:ASIANPAINT). 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.

Check out our latest analysis for Asian Paints

How Fast Is Asian Paints Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. We can see that in the last three years Asian Paints grew its EPS by 15% per year. That's a pretty good rate, if the company can sustain it.

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. Asian Paints shareholders can take confidence from the fact that EBIT margins are up from 14% to 16%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Asian Paints' forecast profits?

Are Asian Paints Insiders Aligned With All Shareholders?

Owing to the size of Asian Paints, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth ₹251b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Is Asian Paints Worth Keeping An Eye On?

One positive for Asian Paints is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Asian Paints' ROE with industry peers (and the market at large).

Although Asian Paints 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.

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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.