The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies with no revenue, no profit, and a history of failure can successfully find investors. Unfortunately, these high-risk investments are often unlikely to ever return, and many investors pay a price to learn their lesson. Although a well-funded business may suffer losses for years, it will eventually have to turn a profit or investors will move on and the business will wither away.
Despite being in the era of astronomical investing in tech stocks, many investors still adopt a more traditional strategy; buy shares in profitable companies like emami (NSE: EMAMILTD). Even if this company is correctly valued by the market, investors would agree that generating consistent earnings will continue to provide Emami with the means to add long-term shareholder value.
See our latest review for Emami
How fast is Emami growing its earnings per share?
If you think markets are even remotely efficient, you expect a company’s share price to follow its earnings-per-share (EPS) performance over the long term. This means EPS growth is seen as a real benefit by most successful long-term investors. To the delight of shareholders, Emami has achieved an impressive annual growth in EPS of 42%, compounded, over the past three years. Although this type of growth rate is not sustainable for long, it certainly attracts the attention of potential investors.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. Emami has maintained stable EBIT margins over the past year, while growing revenue by 11% to ₹32 billion. This is encouraging news for the company!
In the table below, you can see how the company has increased its profits and revenue over time. Click on the table to see the exact numbers.
The trick, as an investor, is to find companies that go to perform well in the future, not just in the past. While crystal balls don’t exist, you can check out our visualization of consensus analyst forecasts for Emami’s future EPS 100% free.
Are Emami insiders aligned with all shareholders?
It is a necessity that business leaders act in the best interests of shareholders and hence insider investing always comes as insurance for the market. Shareholders will be delighted that insiders hold Emami shares of considerable value. Indeed, they have invested a considerable amount of wealth in it, currently valued at ₹15 billion. This suggests that management will be very mindful of shareholder interests when making decisions!
It means a lot to see insiders invested in the company, but shareholders may wonder whether compensation policies are in their best interest. A brief analysis of CEO compensation suggests they are. Our analysis revealed that the median total compensation of CEOs of companies like Emami with a market capitalization between ₹160 billion and ₹511 billion is around ₹51 million.
The CEO of Emami has only received compensation totaling ₹121,000 in the year to March 2021. You can consider this salary as somewhat nominal, which suggests that the CEO does not need lots of pay to stay motivated. While the level of CEO compensation should not be the most important factor in how the company is perceived, modest compensation is positive, as it suggests that the board has the best interests in mind. shareholders. It can also be a sign of a culture of integrity, broadly defined.
Should you add Emami to your watchlist?
Emami’s earnings per share soared, with dizzying growth rates. The icing on the cake is that insiders own a bunch of stock, and the CEO salary really seems quite reasonable. The sharp rise in earnings could signal good business momentum. Emami certainly does some things right and is worth looking into. However, before you get too excited, we found out 2 warning signs for Emami (1 is a bit obnoxious!) that you should be aware of.
The beauty of investing is that you can invest in almost any business you want. But if you’d rather focus on stocks that have been insider buying, here’s a list of companies that have been insider buying over the past three months.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.