Here's Why APL Apollo Tubes (NSE:APLAPOLLO) Has Caught The Eye Of Investors

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like APL Apollo Tubes (NSE:APLAPOLLO). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide APL Apollo Tubes with the means to add long-term value to shareholders.

View our latest analysis for APL Apollo Tubes

APL Apollo Tubes' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that APL Apollo Tubes' EPS has grown 22% each year, compound, over three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.

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. It's noted that APL Apollo Tubes' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for APL Apollo Tubes remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to ₹181b. 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.

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 APL Apollo Tubes?

Are APL Apollo Tubes Insiders Aligned With All Shareholders?

Owing to the size of APL Apollo Tubes, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at ₹15b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between ₹334b and ₹1.0t, like APL Apollo Tubes, the median CEO pay is around ₹64m.

APL Apollo Tubes offered total compensation worth ₹35m to its CEO in the year to March 2023. That is actually below the median for CEO's of similarly sized companies. 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 a culture of integrity, in a broader sense.

Does APL Apollo Tubes Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into APL Apollo Tubes' strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the key takeaway is that APL Apollo Tubes is worth keeping an eye on. Even so, be aware that APL Apollo Tubes is showing 1 warning sign in our investment analysis , you should know about...

Although APL Apollo Tubes 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com