We Ran A Stock Scan For Earnings Growth And Varanium Cloud (NSE:CLOUD) Passed With Ease

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Varanium Cloud (NSE:CLOUD). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Varanium Cloud

How Fast Is Varanium Cloud Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Impressively, Varanium Cloud's EPS catapulted from ₹11.23 to ₹25.28, over the last year. Year on year growth of 125% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

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 Varanium Cloud did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

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.

Since Varanium Cloud is no giant, with a market capitalisation of ₹9.2b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Varanium Cloud Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Varanium Cloud insiders own a meaningful share of the business. Indeed, with a collective holding of 62%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. With that sort of holding, insiders have about ₹5.7b riding on the stock, at current prices. That's nothing to sneeze at!

Is Varanium Cloud Worth Keeping An Eye On?

Varanium Cloud's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Varanium Cloud is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Varanium Cloud (1 is a bit unpleasant) you should be aware of.

Although Varanium Cloud certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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

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.