Here's Why I Think Confidence Petroleum India (NSE:CONFIPET) Is An Interesting Stock

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.

In contrast to all that, I prefer to spend time on companies like Confidence Petroleum India (NSE:CONFIPET), which has not only revenues, but also profits. 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.

Check out our latest analysis for Confidence Petroleum India

Confidence Petroleum India's Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Confidence Petroleum India grew its EPS by 17% per year. That's a good rate of growth, if it can be sustained.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Confidence Petroleum India is growing revenues, and EBIT margins improved by 4.7 percentage points to 9.9%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Confidence Petroleum India isn't a huge company, given its market capitalization of ₹17b. That makes it extra important to check on its balance sheet strength.

Are Confidence Petroleum India Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Confidence Petroleum India insiders have a significant amount of capital invested in the stock. Given insiders own a small fortune of shares, currently valued at ₹3.7b, they have plenty of motivation to push the business to succeed. At 21% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between ₹7.5b and ₹30b, like Confidence Petroleum India, the median CEO pay is around ₹15m.

The Confidence Petroleum India CEO received ₹9.0m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, 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.

Should You Add Confidence Petroleum India To Your Watchlist?

One positive for Confidence Petroleum India is that it is growing EPS. That's nice to see. Earnings growth might be the main game for Confidence Petroleum India, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Still, you should learn about the 2 warning signs we've spotted with Confidence Petroleum India .

You can invest in 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.