Do Schneider Electric Infrastructure's (NSE:SCHNEIDER) Earnings Warrant Your Attention?

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.

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

View our latest analysis for Schneider Electric Infrastructure

Schneider Electric Infrastructure's Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. Which is why EPS growth is looked upon so favourably. Commendations have to be given in seeing that Schneider Electric Infrastructure grew its EPS from ₹0.48 to ₹2.94, in one short year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. The good news is that Schneider Electric Infrastructure is growing revenues, and EBIT margins improved by 2.4 percentage points to 6.1%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

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 Schneider Electric Infrastructure's balance sheet strength, before getting too excited.

Are Schneider Electric Infrastructure 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 Schneider Electric Infrastructure shares worth a considerable sum. As a matter of fact, their holding is valued at ₹1.1b. That's a lot of money, and no small incentive to work hard. Even though that's only about 2.6% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Schneider Electric Infrastructure with market caps between ₹16b and ₹65b is about ₹24m.

Schneider Electric Infrastructure offered total compensation worth ₹15m to its CEO in the year to March 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Schneider Electric Infrastructure To Your Watchlist?

Schneider Electric Infrastructure's earnings have taken off in quite an impressive fashion. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. Schneider Electric Infrastructure certainly ticks a few boxes, so we think it's probably well worth further consideration. We should say that we've discovered 1 warning sign for Schneider Electric Infrastructure that you should be aware of before investing here.

Although Schneider Electric Infrastructure certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.