With EPS Growth And More, Rex Pipes and Cables Industries (NSE:REXPIPES) 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. 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 Rex Pipes and Cables Industries (NSE:REXPIPES). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Rex Pipes and Cables Industries with the means to add long-term value to shareholders.

View our latest analysis for Rex Pipes and Cables Industries

How Quickly Is Rex Pipes and Cables Industries Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Recognition must be given to the that Rex Pipes and Cables Industries has grown EPS by 50% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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 Rex Pipes and Cables Industries remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 16% to ₹1.2b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Rex Pipes and Cables Industries isn't a huge company, given its market capitalisation of ₹619m. That makes it extra important to check on its balance sheet strength.

Are Rex Pipes and Cables Industries Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. Our analysis has discovered that the median total compensation for the CEOs of companies like Rex Pipes and Cables Industries with market caps under ₹17b is about ₹3.3m.

The Rex Pipes and Cables Industries CEO received total compensation of only ₹1.4m in the year to March 2023. 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. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Rex Pipes and Cables Industries To Your Watchlist?

Rex Pipes and Cables Industries' earnings per share growth have been climbing higher at an appreciable rate. Such fast EPS growth prompts the question: has the business reached an inflection point? What's more, the fact that the CEO's compensation is quite reasonable is a sign that the company is conscious of excessive spending. So Rex Pipes and Cables Industries looks like it could be a good quality growth stock, at first glance. That's worth watching. Even so, be aware that Rex Pipes and Cables Industries is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.