With EPS Growth And More, TD Power Systems (NSE:TDPOWERSYS) Makes An Interesting Case

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

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 TD Power Systems (NSE:TDPOWERSYS). 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.

See our latest analysis for TD Power Systems

How Fast Is TD Power Systems Growing Its Earnings Per Share?

In the last three years TD Power Systems' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. It's good to see that TD Power Systems' EPS has grown from ₹21.47 to ₹26.26 over twelve months. That's a 22% gain; respectable growth in the broader scheme of things.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. TD Power Systems maintained stable EBIT margins over the last year, all while growing revenue 23% to ₹8.4b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

TD Power Systems isn't a huge company, given its market capitalisation of ₹16b. That makes it extra important to check on its balance sheet strength.

Are TD Power Systems 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 those who are interested in TD Power Systems will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Owning 42% of the company, insiders have plenty riding on the performance of the the share price. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. With that sort of holding, insiders have about ₹6.9b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Does TD Power Systems Deserve A Spot On Your Watchlist?

One important encouraging feature of TD Power Systems is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with TD Power Systems , and understanding these should be part of your investment process.

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.