If You Like EPS Growth Then Check Out Berger Paints India (NSE:BERGEPAINT) Before It's Too Late

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Berger Paints India (NSE:BERGEPAINT). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Berger Paints India

How Quickly Is Berger Paints India Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Berger Paints India has managed to grow EPS by 20% per year over three years. So it's not surprising to see the company trades on a very high multiple of (past) earnings.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Berger Paints India is growing revenues, and EBIT margins improved by 3.2 percentage points to 15%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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.

Fortunately, we've got access to analyst forecasts of Berger Paints India's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Berger Paints India Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

In the last year insider at Berger Paints India were both selling and buying shares; but happily, as a group they spent ₹7.7m more on stock, than they netted from selling it. On balance, that's a good sign. It is also worth noting that it was Non-Executive Vice Chairman Gurbachan Dhingra who made the biggest single purchase, worth ₹22m, paying ₹832 per share.

On top of the insider buying, it's good to see that Berger Paints India insiders have a valuable investment in the business. Notably, they have an enormous stake in the company, worth ₹19b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Abhijit Roy, is paid less than the median for similar sized companies. For companies with market capitalizations over ₹597b, like Berger Paints India, the median CEO pay is around ₹88m.

The Berger Paints India CEO received total compensation of just ₹43m in the year to . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Should You Add Berger Paints India To Your Watchlist?

For growth investors like me, Berger Paints India's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. Of course, profit growth is one thing but it's even better if Berger Paints India is receiving high returns on equity, since that should imply it can keep growing without much need for capital. Click on this link to see how it is faring against the average in its industry.

The good news is that Berger Paints India is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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.

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