Is Now The Time To Put HBL Power Systems (NSE:HBLPOWER) On Your Watchlist?

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in HBL Power Systems (NSE:HBLPOWER). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for HBL Power Systems

HBL Power Systems' Improving Profits

In the last three years HBL Power Systems' 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. Outstandingly, HBL Power Systems' EPS shot from ₹3.57 to ₹6.46, over the last year. It's a rarity to see 81% year-on-year growth like that. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of HBL Power Systems shareholders is that EBIT margins have grown from 9.8% to 13% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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

Are HBL Power Systems Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that HBL Power Systems insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth ₹13b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Does HBL Power Systems Deserve A Spot On Your Watchlist?

HBL Power Systems' earnings have taken off in quite an impressive fashion. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching HBL Power Systems very closely. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with HBL Power Systems , and understanding this should be part of your investment process.

Although HBL Power Systems certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Indian companies that not only boast of strong growth but have also seen recent insider buying..

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.