Should You Be Adding HB Stockholdings (NSE:HBSL) To Your Watchlist Today?

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In contrast to all that, I prefer to spend time on companies like HB Stockholdings (NSE:HBSL), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for HB Stockholdings

How Fast Is HB Stockholdings Growing Its Earnings Per Share?

In the last three years HB Stockholdings's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, HB Stockholdings's EPS soared from ₹16.47 to ₹21.28, in just one year. That's a commendable gain of 29%.

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. I note that HB Stockholdings's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. HB Stockholdings maintained stable EBIT margins over the last year, all while growing revenue 34% to ₹177m. That's progress.

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.

HB Stockholdings isn't a huge company, given its market capitalization of ₹322m. That makes it extra important to check on its balance sheet strength.

Are HB Stockholdings Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that HB Stockholdings insiders own a significant number of shares certainly appeals to me. In fact, they own 55% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. Valued at only ₹322m HB Stockholdings is really small for a listed company. That means insiders only have ₹177m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like HB Stockholdings with market caps under ₹16b is about ₹3.0m.

The CEO of HB Stockholdings was paid just ₹156k in total compensation for the year ending . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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. I'd also argue reasonable pay levels attest to good decision making more generally.

Does HB Stockholdings Deserve A Spot On Your Watchlist?

You can't deny that HB Stockholdings has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Each to their own, but I think all this makes HB Stockholdings look rather interesting indeed. However, before you get too excited we've discovered 5 warning signs for HB Stockholdings (2 don't sit too well with us!) that you should be aware of.

Although HB Stockholdings 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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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.