Should You Be Adding Airan (NSE:AIRAN) To Your Watchlist Today?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Airan (NSE:AIRAN). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Airan

How Fast Is Airan Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Airan has grown EPS by 17% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Airan's EBIT margins were flat over the last year, revenue grew by a solid 37% to ₹756m. That's progress.

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.

Airan isn't a huge company, given its market capitalization of ₹2.6b. That makes it extra important to check on its balance sheet strength.

Are Airan 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We note that Airan insiders spent ₹13m on stock, over the last year; in contrast, we didn't see any selling. That puts the company in a nice light, as it makes me think its leaders are feeling confident. It is also worth noting that it was MD & Chairman Sandeepkumar Agrawal who made the biggest single purchase, worth ₹2.3m, paying ₹16.14 per share.

On top of the insider buying, we can also see that Airan insiders own a large chunk of the company. Actually, with 45% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. In terms of absolute value, insiders have ₹1.2b invested in the business, using the current share price. That's nothing to sneeze at!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Sandeepkumar Agrawal, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like Airan with market caps under ₹15b is about ₹3.0m.

The CEO of Airan was paid just ₹2.4m in total compensation for the year ending . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Airan Deserve A Spot On Your Watchlist?

You can't deny that Airan has grown its earnings per share at a very impressive rate. That's attractive. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So it's fair to say I think this stock may well deserve a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Airan , and understanding them should be part of your investment process.

As a growth investor I do like to see insider buying. But Airan 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.

When trading Airan or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.