Here's Why We Think Sungarner Energies (NSE:SEL) Might Deserve Your Attention Today

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Sungarner Energies (NSE:SEL). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Sungarner Energies

Sungarner Energies' Earnings Per Share Are Growing

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. Sungarner Energies' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 38%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. The good news is that Sungarner Energies is growing revenues, and EBIT margins improved by 2.8 percentage points to 13%, 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. Click on the chart to see the exact numbers.

Since Sungarner Energies is no giant, with a market capitalisation of ₹1.3b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Sungarner Energies Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Sungarner Energies insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 72%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Valued at only ₹1.3b Sungarner Energies is really small for a listed company. That means insiders only have ₹940m worth of shares, despite the large proportional holding. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Sungarner Energies, with market caps under ₹17b is around ₹3.6m.

The Sungarner Energies CEO received total compensation of only ₹2.9m in the year to March 2024. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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 a culture of integrity, in a broader sense.

Should You Add Sungarner Energies To Your Watchlist?

Sungarner Energies' earnings per share growth have been climbing higher at an appreciable rate. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Big growth can make big winners, so the writing on the wall tells us that Sungarner Energies is worth considering carefully. Still, you should learn about the 4 warning signs we've spotted with Sungarner Energies (including 2 which don't sit too well with us).

Although Sungarner Energies 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.

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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.