If EPS Growth Is Important To You, Navkar (NSE:NAVKARCORP) Presents An Opportunity

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Navkar (NSE:NAVKARCORP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Navkar with the means to add long-term value to shareholders.

View our latest analysis for Navkar

How Quickly Is Navkar Increasing Earnings Per Share?

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 means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Navkar's EPS has grown 34% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Navkar's EBIT margins are flat but, worryingly, its revenue is actually down. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.

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.

Navkar isn't a huge company, given its market capitalisation of ₹9.5b. That makes it extra important to check on its balance sheet strength.

Are Navkar 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. 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.

It's pleasing to note that insiders spent ₹104m buying Navkar shares, over the last year, without reporting any share sales whatsoever. Knowing this, Navkar will have have all eyes on them in anticipation for the what could happen in the near future. Zooming in, we can see that the biggest insider purchase was by Whole Time Director Nemichand Mehta for ₹70m worth of shares, at about ₹57.82 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Navkar insiders own more than a third of the company. Indeed, with a collective holding of 67%, 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. With that sort of holding, insiders have about ₹6.3b riding on the stock, at current prices. So there's plenty there to keep them focused!

Does Navkar Deserve A Spot On Your Watchlist?

For growth investors, Navkar's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. Astute investors will want to keep this stock on watch. However, before you get too excited we've discovered 3 warning signs for Navkar (1 makes us a bit uncomfortable!) that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Navkar, you'll probably love this free list of growing companies that insiders are buying.

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.