If EPS Growth Is Important To You, Bharat Heavy Electricals (NSE:BHEL) Presents An Opportunity

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.

In contrast to all that, many investors prefer to focus on companies like Bharat Heavy Electricals (NSE:BHEL), which has not only revenues, but also profits. 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 Bharat Heavy Electricals

Bharat Heavy Electricals' Improving Profits

Over the last three years, Bharat Heavy Electricals has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. In previous twelve months, Bharat Heavy Electricals' EPS has risen from ₹1.28 to ₹1.37. That amounts to a small improvement of 7.0%.

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 Bharat Heavy Electricals' 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. The music to the ears of Bharat Heavy Electricals shareholders is that EBIT margins have grown from 1.7% to 4.0% in the last 12 months and revenues are on an upwards trend as well. 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. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Bharat Heavy Electricals' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Bharat Heavy Electricals 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. For companies with market capitalisations between ₹165b and ₹530b, like Bharat Heavy Electricals, the median CEO pay is around ₹50m.

Bharat Heavy Electricals' CEO took home a total compensation package of ₹6.3m in the year prior to March 2022. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Bharat Heavy Electricals Worth Keeping An Eye On?

One important encouraging feature of Bharat Heavy Electricals is that it is growing profits. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. All things considered, Bharat Heavy Electricals is definitely worth taking a deeper dive into. We don't want to rain on the parade too much, but we did also find 1 warning sign for Bharat Heavy Electricals that you need to be mindful of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with 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.