With EPS Growth And More, D. P. Abhushan (NSE:DPABHUSHAN) Makes An Interesting Case

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. 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.

In contrast to all that, many investors prefer to focus on companies like D. P. Abhushan (NSE:DPABHUSHAN), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for D. P. Abhushan

How Quickly Is D. P. Abhushan Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that D. P. Abhushan has grown EPS by 40% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. While we note D. P. Abhushan achieved similar EBIT margins to last year, revenue grew by a solid 14% to ₹20b. That's encouraging news for the company!

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

D. P. Abhushan isn't a huge company, given its market capitalisation of ₹6.3b. That makes it extra important to check on its balance sheet strength.

Are D. P. Abhushan Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While we did see insider selling of D. P. Abhushan stock in the last year, one single insider spent plenty more buying. To be exact, Head of Marketing Ratanlal Kataria put their money where their mouth is, paying ₹18m at an average of price of ₹295 per share That certainly piques our interest.

On top of the insider buying, we can also see that D. P. Abhushan insiders own a large chunk of the company. Indeed, with a collective holding of 71%, company insiders are in control and have plenty of capital behind the venture. 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. To give you an idea, the value of insiders' holdings in the business are valued at ₹4.5b at the current share price. That's nothing to sneeze at!

Is D. P. Abhushan Worth Keeping An Eye On?

D. P. Abhushan's earnings have taken off in quite an impressive fashion. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest D. P. Abhushan belongs near the top of your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for D. P. Abhushan you should be aware of.

Keen growth investors love to see insider buying. Thankfully, D. P. Abhushan 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.