Arihant Superstructures (NSE:ARIHANTSUP) Ticks All The Boxes When It Comes To Earnings Growth

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 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Arihant Superstructures (NSE:ARIHANTSUP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Arihant Superstructures with the means to add long-term value to shareholders.

See our latest analysis for Arihant Superstructures

Arihant Superstructures' Improving Profits

In the last three years Arihant Superstructures' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. In previous twelve months, Arihant Superstructures' EPS has risen from ₹10.15 to ₹11.16. That amounts to a small improvement of 9.9%.

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. Arihant Superstructures maintained stable EBIT margins over the last year, all while growing revenue 5.0% to ₹4.1b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Since Arihant Superstructures is no giant, with a market capitalisation of ₹12b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Arihant Superstructures 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 Arihant Superstructures will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Indeed, with a collective holding of 76%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. With that sort of holding, insiders have about ₹9.1b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is Arihant Superstructures Worth Keeping An Eye On?

One important encouraging feature of Arihant Superstructures is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination definitely favoured by investors so consider keeping the company on a watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Arihant Superstructures (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

Although Arihant Superstructures certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Indian companies that not only boast of strong growth but have also seen recent insider buying..

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.