If EPS Growth Is Important To You, Jain Irrigation Systems (NSE:JISLDVREQS) Presents An Opportunity

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Jain Irrigation Systems (NSE:JISLDVREQS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Jain Irrigation Systems with the means to add long-term value to shareholders.

Our analysis indicates that JISLDVREQS is potentially undervalued!

How Fast Is Jain Irrigation Systems Growing Its Earnings Per Share?

Over the last three years, Jain Irrigation Systems has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Jain Irrigation Systems' EPS shot up from ₹1.06 to ₹1.66; a result that's bound to keep shareholders happy. That's a commendable gain of 56%.

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. EBIT margins for Jain Irrigation Systems remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to ₹73b. That's a real positive.

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.

Since Jain Irrigation Systems is no giant, with a market capitalisation of ₹21b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Jain Irrigation Systems Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Jain Irrigation Systems shares worth a considerable sum. Indeed, they hold ₹1.2b worth of its stock. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 5.7% of the shares on issue for the business, an appreciable amount considering the market cap.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Jain Irrigation Systems with market caps between ₹8.1b and ₹33b is about ₹19m.

Jain Irrigation Systems' CEO only received compensation totalling ₹2.8m in the year to March 2022. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is Jain Irrigation Systems Worth Keeping An Eye On?

You can't deny that Jain Irrigation Systems has grown its earnings per share at a very impressive rate. That's attractive. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. Everyone has their own preferences when it comes to investing but it definitely makes Jain Irrigation Systems look rather interesting indeed. It is worth noting though that we have found 3 warning signs for Jain Irrigation Systems (1 is potentially serious!) that you need to take into consideration.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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.