Here's Why We Think HPL Electric & Power (NSE:HPL) Is Well Worth Watching

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like HPL Electric & Power (NSE:HPL), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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How Fast Is HPL Electric & Power 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that HPL Electric & Power has grown EPS by 40% per year, over the last three years. 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. EBIT margins for HPL Electric & Power remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.1% to ₹17b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

See our latest analysis for HPL Electric & Power

Since HPL Electric & Power is no giant, with a market capitalisation of ₹27b, you should definitely check its cash and debt before getting too excited about its prospects.

Are HPL Electric & Power 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. Shareholders will be pleased by the fact that insiders own HPL Electric & Power shares worth a considerable sum. Holding ₹6.1b worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That holding amounts to 23% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.

Is HPL Electric & Power Worth Keeping An Eye On?

HPL Electric & Power's earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. 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 HPL Electric & Power very closely. Even so, be aware that HPL Electric & Power is showing 1 warning sign in our investment analysis , you should know about...

Although HPL Electric & Power certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.