Here's Why I Think Veto Switchgears and Cables (NSE:VETO) Might Deserve Your Attention Today

By
Simply Wall St
Published
May 13, 2022
NSEI:VETO
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Veto Switchgears and Cables (NSE:VETO). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Veto Switchgears and Cables

How Fast Is Veto Switchgears and Cables Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Like a wedge-tailed eagle on the wind, Veto Switchgears and Cables's EPS soared from ₹6.27 to ₹10.30, in just one year. That's a impressive gain of 64%.

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. Veto Switchgears and Cables maintained stable EBIT margins over the last year, all while growing revenue 63% to ₹2.5b. That's progress.

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.

earnings-and-revenue-history
NSEI:VETO Earnings and Revenue History May 13th 2022

Since Veto Switchgears and Cables is no giant, with a market capitalization of ₹1.7b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Veto Switchgears and Cables Insiders Aligned With All Shareholders?

As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. I discovered that the median total compensation for the CEOs of companies like Veto Switchgears and Cables with market caps under ₹15b is about ₹3.0m.

The Veto Switchgears and Cables CEO received total compensation of only ₹2.4m in the year to . 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. 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 good governance, more generally.

Is Veto Switchgears and Cables Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Veto Switchgears and Cables's strong EPS growth. With swiftly growing earnings, it probably has its best days ahead, and the modest CEO pay suggests the company is careful with cash. So I'd argue this is the kind of stock worth watching, even if it isn't great value today. What about risks? Every company has them, and we've spotted 4 warning signs for Veto Switchgears and Cables (of which 1 makes us a bit uncomfortable!) you should know about.

Although Veto Switchgears and Cables certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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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