With EPS Growth And More, HDFC Bank (NSE:HDFCBANK) Is Interesting

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like HDFC Bank (NSE:HDFCBANK). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for HDFC Bank

HDFC Bank's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will 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 HDFC Bank grew its EPS by 16% per year. That's a pretty good rate, if the company can sustain it.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of HDFC Bank's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note HDFC Bank's EBIT margins were flat over the last year, revenue grew by a solid 8.1% to ₹837b. That's progress.

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.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are HDFC Bank Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹8.8t company like HDFC Bank. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth ₹37b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like HDFC Bank, with market caps over ₹600b, is about ₹88m.

HDFC Bank offered total compensation worth ₹66m to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add HDFC Bank To Your Watchlist?

As I already mentioned, HDFC Bank is a growing business, which is what I like to see. The fact that EPS is growing is a genuine positive for HDFC Bank, but the pretty picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. However, before you get too excited we've discovered 3 warning signs for HDFC Bank (1 can't be ignored!) that you should be aware of.

Although HDFC Bank certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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.

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