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. 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 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.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

How Quickly Is Hydro One Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Hydro One grew its EPS by 6.5% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Hydro One maintained stable EBIT margins over the last year, all while growing revenue 10.0% to CA$8.7b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

See our latest analysis for Hydro One

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Hydro One.

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.

We haven't seen any insiders selling Hydro One shares, in the last year. Add in the fact that Stacey Mowbray, the Independent Director of the company, paid CA$31k for shares at around CA$44.03 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

It's reassuring that Hydro One insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. 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$10m.

The CEO of Hydro One only received CA$4.1m in total compensation for the year ending December 2024. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does Hydro One Deserve A Spot On Your Watchlist?

One positive for Hydro One is that it is growing EPS. That's nice to see. And that's not all. We've also seen insiders buying stock, and noted modest executive pay. 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. It is worth noting though that we have found 2 warning signs for Hydro One (1 is a bit concerning!) that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Hydro One, you'll probably love this curated collection of companies in CA that have an attractive valuation alongside insider buying in the last three months.

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.