Should You Be Adding Swan Energy (NSE:SWANENERGY) To Your Watchlist Today?

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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Swan Energy (NSE:SWANENERGY). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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Swan Energy's Improving Profits

Swan Energy has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, Swan Energy's EPS soared from ₹18.56 to ₹25.51, over the last year. That's a fantastic gain of 37%.

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. On the revenue front, Swan Energy has done well over the past year, growing revenue by 20% to ₹55b but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

See our latest analysis for Swan Energy

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 Swan Energy's balance sheet strength, before getting too excited.

Are Swan Energy Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalisations between ₹85b and ₹273b, like Swan Energy, the median CEO pay is around ₹43m.

Swan Energy's CEO took home a total compensation package of ₹14m in the year prior to March 2024. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Swan Energy Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Swan Energy's strong EPS growth. Strong EPS growth is a great look for the company and reasonable CEO compensation sweetens the deal for investors ass it alludes to management being conscious of frivolous spending. We think that based on its merits alone, this stock is worth watching into the future. Now, you could try to make up your mind on Swan Energy by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Swan Energy 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.