If EPS Growth Is Important To You, Arihant Superstructures (NSE:ARIHANTSUP) Presents An Opportunity

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 currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 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

How Fast Is Arihant Superstructures Growing Its Earnings Per Share?

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. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Arihant Superstructures' EPS grew from ₹6.11 to ₹10.24, over the previous 12 months. It's not often a company can achieve year-on-year growth of 68%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Unfortunately, Arihant Superstructures' revenue dropped 2.8% last year, but the silver lining is that EBIT margins improved from 18% to 21%. That's not a good look.

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.

Arihant Superstructures isn't a huge company, given its market capitalisation of ₹10b. That makes it extra important to check on its balance sheet strength.

Are Arihant Superstructures 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Shareholders in Arihant Superstructures will be more than happy to see insiders committing themselves to the company, spending ₹20m on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. It is also worth noting that it was Additional Whole-time Director Parth Chhajer who made the biggest single purchase, worth ₹8.6m, paying ₹116 per share.

On top of the insider buying, we can also see that Arihant Superstructures insiders own a large chunk of the company. In fact, they own 78% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have ₹8.0b invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Is Arihant Superstructures Worth Keeping An Eye On?

Arihant Superstructures' earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Arihant Superstructures deserves timely attention. However, before you get too excited we've discovered 2 warning signs for Arihant Superstructures (1 is significant!) that you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Arihant Superstructures isn't the only one. You can see a a free list of them here.

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.