Is Now The Time To Put H.G. Infra Engineering (NSE:HGINFRA) 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. 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.

So if you're like me, you might be more interested in profitable, growing companies, like H.G. Infra Engineering (NSE:HGINFRA). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for H.G. Infra Engineering

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

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, H.G. Infra Engineering's EPS has grown 25% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. It seems H.G. Infra Engineering is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not a major concern but nor does it point to the long term growth we like to see.

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.

Since H.G. Infra Engineering is no giant, with a market capitalization of ₹19b, so you should definitely check its cash and debt before getting too excited about its prospects.

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

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's good to see H.G. Infra Engineering insiders walking the walk, by spending ₹36m on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. We also note that it was the , Hodal Singh, who made the biggest single acquisition, paying ₹20m for shares at about ₹215 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since H.G. Infra Engineering insiders own more than a third of the company. In fact, they own 74% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about ₹14b riding on the stock, at current prices. That's nothing to sneeze at!

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

For growth investors like me, H.G. Infra Engineering's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. So I do think this is one stock worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with H.G. Infra Engineering (at least 1 which makes us a bit uncomfortable) , and understanding these should be part of your investment process.

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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