If EPS Growth Is Important To You, Hydro One (TSE:H) Presents An Opportunity

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 currently 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. 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 Hydro One (TSE:H). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Hydro One

How Quickly Is Hydro One 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Hydro One managed to grow EPS by 5.7% per year, over three years. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Hydro One achieved similar EBIT margins to last year, revenue grew by a solid 3.7% to CA$8.1b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Hydro One's forecast profits?

Are Hydro One Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.

First and foremost; there we saw no insiders sell Hydro One shares in the last year. Even better, though, is that the Independent Director, Brian Vaasjo, bought a whopping CA$500k worth of shares, paying about CA$39.03 per share, on average. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

It's commendable to see that insiders have been buying shares in Hydro One, but there is more evidence of shareholder friendly management. Namely, Hydro One has a very reasonable level of CEO pay. Our analysis has discovered that the median total compensation for the CEOs of companies like Hydro One, with market caps over CA$11b, is about CA$11m.

Hydro One's CEO took home a total compensation package of CA$3.2m in the year prior to December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is Hydro One Worth Keeping An Eye On?

One positive for Hydro One is that it is growing EPS. That's nice to see. And there's more to love too, with modest CEO remuneration and insider buying interest continuing the positives for the company. If these factors aren't enough to secure Hydro One a spot on the watchlist, then it certainly warrants a closer look at the very least. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Hydro One (1 doesn't sit too well with us) you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Hydro One isn't the only one. You can see a a curated list of Canadian 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.