Is Now The Time To Put Olectra Greentech (NSE:OLECTRA) On Your Watchlist?

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. 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. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Olectra Greentech (NSE:OLECTRA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

How Fast Is Olectra Greentech Growing Its Earnings Per Share?

Over the last three years, Olectra Greentech 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. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Olectra Greentech's EPS soared from ₹10.98 to ₹16.03, over the last year. That's a impressive gain of 46%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Olectra Greentech achieved similar EBIT margins to last year, revenue grew by a solid 32% to ₹16b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

View our latest analysis for Olectra Greentech

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Olectra Greentech's balance sheet strength, before getting too excited.

Are Olectra Greentech 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. So it is good to see that Olectra Greentech insiders have a significant amount of capital invested in the stock. To be specific, they have ₹1.0b worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 1.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Olectra Greentech Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Olectra Greentech's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Olectra Greentech shapes up to industry peers, when it comes to ROE.

Although Olectra Greentech 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.