With EPS Growth And More, Central Depository Services (India) (NSE:CDSL) Makes An Interesting Case

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. 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 Central Depository Services (India) (NSE:CDSL). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Central Depository Services (India)

How Fast Is Central Depository Services (India) 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. Shareholders will be happy to know that Central Depository Services (India)'s EPS has grown 26% each year, compound, over three years. This has no doubt fuelled the optimism that sees the stock trading on a high multiple of earnings.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Central Depository Services (India)'s revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Central Depository Services (India) maintained stable EBIT margins over the last year, all while growing revenue 26% to ₹7.8b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Central Depository Services (India)?

Are Central Depository Services (India) Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalisations between ₹167b and ₹534b, like Central Depository Services (India), the median CEO pay is around ₹45m.

Central Depository Services (India) offered total compensation worth ₹37m to its CEO in the year to March 2023. That comes in below the average for similar sized companies and seems pretty reasonable. 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 Central Depository Services (India) To Your Watchlist?

You can't deny that Central Depository Services (India) 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 this stock is well worth an addition to your watchlist as it has the potential to provide great value to shareholders. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Central Depository Services (India) that you should be aware of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

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.