Here's Why We Think BF Utilities (NSE:BFUTILITIE) Might Deserve Your Attention Today

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like BF Utilities (NSE:BFUTILITIE). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide BF Utilities with the means to add long-term value to shareholders.

Check out our latest analysis for BF Utilities

BF Utilities' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, BF Utilities has grown EPS by 31% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. The good news is that BF Utilities is growing revenues, and EBIT margins improved by 6.2 percentage points to 56%, over the last year. That's great to see, on both counts.

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

BF Utilities isn't a huge company, given its market capitalisation of ₹17b. That makes it extra important to check on its balance sheet strength.

Are BF Utilities 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. The median total compensation for CEOs of companies similar in size to BF Utilities, with market caps between ₹8.0b and ₹32b, is around ₹17m.

BF Utilities offered total compensation worth ₹9.0m to its CEO in the year to March 2021. That comes in below the average for similar sized companies and seems pretty reasonable. 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. It can also be a sign of good governance, more generally.

Does BF Utilities Deserve A Spot On Your Watchlist?

You can't deny that BF Utilities has grown its earnings per share at a very impressive rate. That's attractive. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. Based on these factors, this stock may well deserve a spot on your watchlist, or even a little further research. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for BF Utilities that you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.