Should You Be Adding HBL Power Systems (NSE:HBLPOWER) To Your Watchlist Today?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide HBL Power Systems with the means to add long-term value to shareholders.

See our latest analysis for HBL Power Systems

HBL Power Systems' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. HBL Power Systems' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 51%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that HBL Power Systems is growing revenues, and EBIT margins improved by 4.7 percentage points to 9.4%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

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

Are HBL Power Systems Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

With strong conviction, HBL Power Systems insiders have stood united by refusing to sell shares over the last year. But the real excitement comes from the ₹14m that Founder Aluru Prasad spent buying shares (at an average price of about ₹51.00). Purchases like this clue us in to the to the faith management has in the business' future.

The good news, alongside the insider buying, for HBL Power Systems bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have ₹2.7b worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 9.5% of the company, demonstrating a degree of high-level alignment with shareholders.

Does HBL Power Systems Deserve A Spot On Your Watchlist?

HBL Power Systems' earnings have taken off in quite an impressive fashion. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe HBL Power Systems deserves timely attention. What about risks? Every company has them, and we've spotted 1 warning sign for HBL Power Systems you should know about.

Keen growth investors love to see insider buying. Thankfully, HBL Power Systems isn't the only one. You can see a 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.