If EPS Growth Is Important To You, Central Bank of India (NSE:CENTRALBK) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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 Central Bank of India (NSE:CENTRALBK). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Central Bank of India with the means to add long-term value to shareholders.

View our latest analysis for Central Bank of India

How Fast Is Central Bank of India Growing Its Earnings Per Share?

In the last three years Central Bank of India's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Central Bank of India's EPS skyrocketed from ₹1.93 to ₹3.07, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 59%.

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. Not all of Central Bank of India's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Central Bank of India remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 37% to ₹144b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Central Bank of India's balance sheet strength, before getting too excited.

Are Central Bank of India Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. Our analysis has discovered that the median total compensation for the CEOs of companies like Central Bank of India with market caps between ₹334b and ₹1.0t is about ₹49m.

Central Bank of India's CEO only received compensation totalling ₹4.1m in the year to March 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Central Bank of India To Your Watchlist?

For growth investors, Central Bank of India's raw rate of earnings growth is a beacon in the night. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. So this stock is well worth an addition to your watchlist as it has the potential to provide great value to shareholders. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Central Bank of India is trading on a high P/E or a low P/E, relative to its industry.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com