Here's Why I Think Crompton Greaves Consumer Electricals (NSE:CROMPTON) Is An Interesting Stock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Crompton Greaves Consumer Electricals (NSE:CROMPTON). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Crompton Greaves Consumer Electricals

How Fast Is Crompton Greaves Consumer Electricals Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Crompton Greaves Consumer Electricals has grown EPS by 23% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. While we note Crompton Greaves Consumer Electricals's EBIT margins were flat over the last year, revenue grew by a solid 32% to ₹53b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of Crompton Greaves Consumer Electricals's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Crompton Greaves Consumer Electricals Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. I discovered that the median total compensation for the CEOs of companies like Crompton Greaves Consumer Electricals with market caps between ₹149b and ₹476b is about ₹44m.

Crompton Greaves Consumer Electricals offered total compensation worth ₹37m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Crompton Greaves Consumer Electricals Deserve A Spot On Your Watchlist?

You can't deny that Crompton Greaves Consumer Electricals has grown its earnings per share at a very impressive rate. That's attractive. The fast growth bodes well while the very reasonable CEO pay assists builds some confidence in the board. 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 2 warning signs for Crompton Greaves Consumer Electricals you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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.

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