Does H.G. Infra Engineering (NSE:HGINFRA) Deserve A Spot On Your Watchlist?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like H.G. Infra Engineering (NSE:HGINFRA). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for H.G. Infra Engineering

H.G. Infra Engineering's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that H.G. Infra Engineering has managed to grow EPS by 33% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. H.G. Infra Engineering shareholders can take confidence from the fact that EBIT margins are up from 13% to 16%, and revenue is growing. 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. To see the actual numbers, click on the chart.

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

Are H.G. Infra Engineering Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

First things first; I didn't see insiders sell H.G. Infra Engineering shares in the last year. Even better, though, is that the , Hodal Singh, bought a whopping ₹20m worth of shares, paying about ₹215 per share, on average. Big buys like that give me a sense of opportunity; actions speak louder than words.

On top of the insider buying, we can also see that H.G. Infra Engineering insiders own a large chunk of the company. Indeed, with a collective holding of 74%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. And their holding is extremely valuable at the current share price, totalling ₹19b. Now that's what I call some serious skin in the game!

Is H.G. Infra Engineering Worth Keeping An Eye On?

You can't deny that H.G. Infra Engineering has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. However, before you get too excited we've discovered 3 warning signs for H.G. Infra Engineering (2 don't sit too well with us!) that you should be aware of.

As a growth investor I do like to see insider buying. But H.G. Infra Engineering 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. 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.
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