With EPS Growth And More, Power & Instrumental (Gujarat) (NSE:PIGL) Makes An Interesting Case

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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Power & Instrumental (Gujarat) (NSE:PIGL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Power & Instrumental (Gujarat) with the means to add long-term value to shareholders.

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

Power & Instrumental (Gujarat)'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 you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Power & Instrumental (Gujarat)'s EPS has grown 21% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about. Getting in to the the finer details, it important to know that the EPS growth has been helped by share buybacks, demonstrating that the business is positioned to return capital to its shareholders.

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. EBIT margins for Power & Instrumental (Gujarat) remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 52% to ₹2.0b. That's progress.

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.

See our latest analysis for Power & Instrumental (Gujarat)

Since Power & Instrumental (Gujarat) is no giant, with a market capitalisation of ₹2.5b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Power & Instrumental (Gujarat) Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Power & Instrumental (Gujarat) insiders own a significant number of shares certainly is appealing. Owning 43% of the company, insiders have plenty riding on the performance of the the share price. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. Although, with Power & Instrumental (Gujarat) being valued at ₹2.5b, this is a small company we're talking about. So this large proportion of shares owned by insiders only amounts to ₹1.1b. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does Power & Instrumental (Gujarat) Deserve A Spot On Your Watchlist?

For growth investors, Power & Instrumental (Gujarat)'s raw rate of earnings growth is a beacon in the night. 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. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. However, before you get too excited we've discovered 1 warning sign for Power & Instrumental (Gujarat) that you should be aware of.

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 tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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.