If EPS Growth Is Important To You, Deep Industries (NSE:DEEPINDS) Presents An Opportunity

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Deep Industries (NSE:DEEPINDS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Deep Industries with the means to add long-term value to shareholders.

Check out our latest analysis for Deep Industries

How Fast Is Deep Industries Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Recognition must be given to the that Deep Industries has grown EPS by 59% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. EBIT margins for Deep Industries remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.1% to ₹3.4b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Deep Industries isn't a huge company, given its market capitalisation of ₹13b. That makes it extra important to check on its balance sheet strength.

Are Deep Industries Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Deep Industries will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 54% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. In terms of absolute value, insiders have ₹6.8b invested in the business, at the current share price. That's nothing to sneeze at!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Deep Industries, with market caps between ₹8.3b and ₹33b, is around ₹17m.

The CEO of Deep Industries was paid just ₹4.6m 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.

Should You Add Deep Industries To Your Watchlist?

Deep Industries' earnings per share growth have been climbing higher at an appreciable rate. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The strong EPS improvement suggests the businesses is humming along. Deep Industries certainly ticks a few boxes, so we think it's probably well worth further consideration. Before you take the next step you should know about the 2 warning signs for Deep Industries that we have uncovered.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you 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.

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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.