I Ran A Stock Scan For Earnings Growth And Trejhara Solutions (NSE:TREJHARA) Passed With Ease

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Trejhara Solutions (NSE:TREJHARA). 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.

Check out our latest analysis for Trejhara Solutions

How Fast Is Trejhara Solutions 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. Over the last three years, Trejhara Solutions has grown EPS by 12% per year. That's a pretty good rate, if the company can sustain it.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Trejhara Solutions is growing revenues, and EBIT margins improved by 11.6 percentage points to 26%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Trejhara Solutions isn't a huge company, given its market capitalization of ₹690m. That makes it extra important to check on its balance sheet strength.

Are Trejhara Solutions Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Trejhara Solutions insiders own a meaningful share of the business. In fact, they own 45% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only ₹690m Trejhara Solutions is really small for a listed company. That means insiders only have ₹312m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Trejhara Solutions with market caps under ₹15b is about ₹2.9m.

The CEO of Trejhara Solutions was paid just ₹2.5m in total compensation for the year ending . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. I'd also argue reasonable pay levels attest to good decision making more generally.

Does Trejhara Solutions Deserve A Spot On Your Watchlist?

One positive for Trejhara Solutions is that it is growing EPS. That's nice to see. The fact that EPS is growing is a genuine positive for Trejhara Solutions, but the pretty picture gets better than that. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Trejhara Solutions (at least 1 which is significant) , and understanding these should be part of your investment process.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.
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