If EPS Growth Is Important To You, Aurobindo Pharma (NSE:AUROPHARMA) Presents An Opportunity

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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Aurobindo Pharma (NSE:AUROPHARMA), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Aurobindo Pharma

How Fast Is Aurobindo Pharma Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Aurobindo Pharma managed to grow EPS by 7.1% per year, over three years. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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. Aurobindo Pharma shareholders can take confidence from the fact that EBIT margins are up from 13% to 16%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Aurobindo Pharma?

Are Aurobindo Pharma Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹628b company like Aurobindo Pharma. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth ₹96b. This totals to 15% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Very encouraging.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Aurobindo Pharma with market caps between ₹349b and ₹1.0t is about ₹67m.

Aurobindo Pharma's CEO took home a total compensation package worth ₹45m in the year leading up to March 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Aurobindo Pharma Deserve A Spot On Your Watchlist?

As previously touched on, Aurobindo Pharma is a growing business, which is encouraging. Earnings growth might be the main attraction for Aurobindo Pharma, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. If you think Aurobindo Pharma might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

Although Aurobindo Pharma certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.