If EPS Growth Is Important To You, Laxmi Goldorna House (NSE:LGHL) Presents An Opportunity

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.' 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 Laxmi Goldorna House (NSE:LGHL). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Laxmi Goldorna House

How Quickly Is Laxmi Goldorna House Increasing Earnings Per Share?

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. That means EPS growth is considered a real positive by most successful long-term investors. Laxmi Goldorna House's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 60%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. Unfortunately, Laxmi Goldorna House's revenue dropped 24% last year, but the silver lining is that EBIT margins improved from 2.8% to 5.5%. That falls short of ideal.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Since Laxmi Goldorna House is no giant, with a market capitalisation of ₹3.7b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Laxmi Goldorna House Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did Laxmi Goldorna House insiders refrain from selling stock during the year, but they also spent ₹7.9m buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. Zooming in, we can see that the biggest insider purchase was by company insider Jinit Shah for ₹4.0m worth of shares, at about ₹28.11 per share.

On top of the insider buying, we can also see that Laxmi Goldorna House insiders own a large chunk of the company. To be exact, company insiders hold 73% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. To give you an idea, the value of insiders' holdings in the business are valued at ₹2.7b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Does Laxmi Goldorna House Deserve A Spot On Your Watchlist?

Laxmi Goldorna House's earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Laxmi Goldorna House deserves timely attention. You still need to take note of risks, for example - Laxmi Goldorna House has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Laxmi Goldorna House, you'll probably love this curated collection of companies in IN that have witnessed growth alongside insider buying in the last three months.

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.