Do Arihant Superstructures's (NSE:ARIHANTSUP) Earnings Warrant Your Attention?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Arihant Superstructures (NSE:ARIHANTSUP). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Arihant Superstructures

Arihant Superstructures's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud Arihant Superstructures's stratospheric annual EPS growth of 48%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Arihant Superstructures's EBIT margins were flat over the last year, revenue grew by a solid 87% to ₹3.8b. That's progress.

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

Arihant Superstructures isn't a huge company, given its market capitalization of ₹6.2b. That makes it extra important to check on its balance sheet strength.

Are Arihant Superstructures Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Arihant Superstructures top brass are certainly in sync, not having sold any shares, over the last year. But my excitement comes from the ₹9.9m that Executive Chairman & MD Ashokkumar Chhajer spent buying shares (at an average price of about ₹125).

On top of the insider buying, we can also see that Arihant Superstructures insiders own a large chunk of the company. Indeed, with a collective holding of 76%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about ₹4.7b riding on the stock, at current prices. That's nothing to sneeze at!

Should You Add Arihant Superstructures To Your Watchlist?

Arihant Superstructures's earnings have taken off like any random crypto-currency did, back in 2017. The cherry on top is that insiders own a bunch of shares, and one has been buying more. Because of the potential that it has reached an inflection point, I'd suggest Arihant Superstructures belongs on the top of your watchlist. We should say that we've discovered 4 warning signs for Arihant Superstructures (1 doesn't sit too well with us!) that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Arihant Superstructures, you'll probably love this free list of growing companies that insiders are 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.