For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it currently lacks a track record of revenue and earnings. But the reality is that when a company loses money every year, for long enough, its investors will usually take their share of those losses. 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 age of astronomical investing in tech stocks, many investors still adopt a more traditional strategy; buy shares in profitable companies like Lotus Eye Hospital and Institute (NSE: LOTUSEYE). While profit isn’t the only metric to consider when investing, it’s worth recognizing companies that can consistently produce it.
See our latest analysis for Lotus Eye Hospital and Institute
How fast is Lotus Eye Hospital and Institute growing earnings per share?
Lotus Eye Hospital and Institute has seen massive growth in earnings per share over the past three years. So much so that this three-year growth rate would not be a fair assessment of the company’s future. It would therefore be better to isolate the growth rate over the last year for our analysis. Unusually, Lotus Eye Hospital and Institute’s EPS has increased from ₹0.75 to ₹1.44 in the past year. A 90% annual growth is certainly a sight to behold.
One way to check a company’s growth is to look at the evolution of its revenues and its earnings before interest and taxes (EBIT) margins. Lotus Eye Hospital and Institute shareholders can take comfort in the fact that EBIT margins have increased from 4.5% to 8.6% and revenues are increasing. It’s great to see, on both counts.
The chart below shows how the company’s top and bottom line has grown over time. For more details, click on the image.
Since Lotus Eye Hospital and Institute is not a giant, with a market capitalization of ₹891 million, you should definitely check its cash flow and debt. before getting too excited about his prospects.
Are Lotus Eye Hospital and Institute insiders aligned with all shareholders?
Seeing insiders owning a large portion of the issued shares is often a good sign. Their incentives will be aligned with investors and there is less likelihood of a sudden sell-off impacting the stock price. We are therefore pleased to report that insiders of the Lotus Eye Hospital and Institute hold a significant share of the business. Indeed, with a collective 65% ownership, company insiders control and have significant capital behind the company. Intuition will tell you this is a good sign, as it suggests that they will be incentivized to create long-term shareholder value. Of course, Lotus Eye Hospital and Institute is a very small company, with a market capitalization of only ₹891 million. Thus, this large proportion of shares held by insiders only amounts to ₹583 million. This isn’t too much of a stake, but it should still motivate insiders to deliver the best results to shareholders.
It’s good to see that insiders are invested in the company, but are the compensation levels reasonable? Our quick analysis of CEO compensation seems to indicate that they are. For companies with a market capitalization below ₹16 billion, such as Lotus Eye Hospital and Institute, the median CEO salary is around ₹3.0 million.
The CEO of Lotus Eye Hospital and Institute received only ₹678,000 in total compensation for the year ending March 2021. This total may indicate that the CEO is sacrificing take-home pay for performance-based benefits, ensuring that their motivations are synonymous with a solid business. results. 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 Lotus Eye Hospital and Institute to your watch list?
Earnings per share growth at Lotus Eye Hospital and Institute has increased at an appreciable pace. An added bonus for those interested is that the management owns a bunch of stock and the CEO compensation is quite reasonable, illustrating good cash management. The drastic profit growth indicates that the company is getting better and better. Hopefully this trend will continue in the future. Lotus Eye Hospital and Institute certainly ticks a few boxes, so we think it’s probably worth looking into further. We don’t want to rain too much on the parade, but we also found 4 warning signs for Lotus Eye Hospital and Institute which you must take into account.
There is always the possibility of doing well by buying stocks that are not increased income and not have insiders buying stocks. But for those who consider these measures important, we encourage you to check out the companies that do have these characteristics. You can access a free list of them here.
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.