Do STEL Holdings' (NSE:STEL) Earnings Warrant Your Attention?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 STEL Holdings (NSE:STEL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide STEL Holdings with the means to add long-term value to shareholders.

See our latest analysis for STEL Holdings

How Fast Is STEL Holdings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Over the last three years, STEL Holdings has grown EPS by 16% per year. That growth rate is fairly good, assuming the company can keep it up.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. STEL Holdings maintained stable EBIT margins over the last year, all while growing revenue 49% to ₹193m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since STEL Holdings is no giant, with a market capitalisation of ₹2.6b, you should definitely check its cash and debt before getting too excited about its prospects.

Are STEL Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

First and foremost; there we saw no insiders sell STEL Holdings shares in the last year. But the really good news is that company insider Harsh Goenka spent ₹29m buying stock, at an average price of around ₹165. It seems at least one insider thinks that the company is doing well - and they are backing that view with cash.

It's reassuring that STEL Holdings insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Namely, STEL Holdings has a very reasonable level of CEO pay. For companies with market capitalisations under ₹16b, like STEL Holdings, the median CEO pay is around ₹3.6m.

The CEO of STEL Holdings was paid just ₹240k in total compensation for the year ending March 2022. 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 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.

Is STEL Holdings Worth Keeping An Eye On?

One important encouraging feature of STEL Holdings is that it is growing profits. And there's more to STEL Holdings, with the insider buying and modest CEO pay being a great look for those with an eye on the company. All things considered, STEL Holdings is certainly displaying its merits and is worthy of taking research to the next step. You still need to take note of risks, for example - STEL Holdings has 3 warning signs we think you should be aware of.

Keen growth investors love to see insider buying. Thankfully, STEL Holdings isn't the only one. You can see a a free list of them here.

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.