Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
So if you're like me, you might be more interested in profitable, growing companies, like Aurangabad Distillery (NSE:AURDIS). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
View our latest analysis for Aurangabad Distillery
How Quickly Is Aurangabad Distillery Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. Aurangabad Distillery managed to grow EPS by 15% per year, over three years. That's a pretty good rate, if the company can sustain it.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that Aurangabad Distillery is growing revenues, and EBIT margins improved by 6.5 percentage points to 18%, over the last year. Ticking those two boxes is a good sign of growth, in my 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.
Since Aurangabad Distillery is no giant, with a market capitalization of ₹246m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Aurangabad Distillery Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We note that Aurangabad Distillery insiders spent ₹3.6m on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Chairman, Amardeepsingh Sethi, who made the biggest single acquisition, paying ₹1.3m for shares at about ₹35.28 each.