Here's Why Vimta Labs (NSE:VIMTALABS) Has Caught The Eye Of Investors

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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

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How Fast Is Vimta Labs 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. Over the last three years, Vimta Labs has grown EPS by 13% per year. That growth rate is fairly good, assuming the company can keep it up.

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. Vimta Labs shareholders can take confidence from the fact that EBIT margins are up from 17% to 21%, and revenue is growing. Both of which are great metrics to check off for potential growth.

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.

See our latest analysis for Vimta Labs

Since Vimta Labs is no giant, with a market capitalisation of ₹24b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Vimta Labs Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Vimta Labs followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Given insiders own a significant chunk of shares, currently valued at ₹8.1b, they have plenty of motivation to push the business to succeed. Amounting to 34% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Vimta Labs with market caps between ₹8.5b and ₹34b is about ₹17m.

Vimta Labs' CEO took home a total compensation package worth ₹13m 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.

Should You Add Vimta Labs To Your Watchlist?

One important encouraging feature of Vimta Labs is that it is growing profits. The growth of EPS may be the eye-catching headline for Vimta Labs, but there's more to bring joy for shareholders. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Vimta Labs , and understanding it should be part of your investment process.

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.