We Ran A Stock Scan For Earnings Growth And Astra Microwave Products (NSE:ASTRAMICRO) Passed With Ease

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Astra Microwave Products (NSE:ASTRAMICRO), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

We check all companies for important risks. See what we found for Astra Microwave Products in our free report.

Astra Microwave Products' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Astra Microwave Products has managed to grow EPS by 31% per year over three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of Astra Microwave Products shareholders is that EBIT margins have grown from 15% to 20% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

View our latest analysis for Astra Microwave Products

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Astra Microwave Products' future profits.

Are Astra Microwave Products Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's nice to see that there have been no reports of any insiders selling shares in Astra Microwave Products in the previous 12 months. With that in mind, it's heartening that Maram Reddy, the Joint MD & Executive Director of the company, paid ₹2.1m for shares at around ₹935 each. It seems that at least one insider is prepared to show the market there is potential within Astra Microwave Products.

The good news, alongside the insider buying, for Astra Microwave Products bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enviable stake in the company, worth ₹10b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

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. The cherry on top is that the CEO, Maram Reddy is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Astra Microwave Products, with market caps between ₹86b and ₹274b, is around ₹44m.

Astra Microwave Products offered total compensation worth ₹24m to its CEO in the year to March 2024. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add Astra Microwave Products To Your Watchlist?

You can't deny that Astra Microwave Products has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. Astute investors will want to keep this stock on watch. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Astra Microwave Products' ROE with industry peers (and the market at large).

Keen growth investors love to see insider activity. Thankfully, Astra Microwave Products isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by high insider ownership.

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.