If EPS Growth Is Important To You, Bharat Wire Ropes (NSE:BHARATWIRE) Presents An Opportunity

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Bharat Wire Ropes (NSE:BHARATWIRE). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Bharat Wire Ropes with the means to add long-term value to shareholders.

View our latest analysis for Bharat Wire Ropes

Bharat Wire Ropes' Improving Profits

In the last three years Bharat Wire Ropes' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Bharat Wire Ropes' EPS grew from ₹6.01 to ₹12.21, over the previous 12 months. It's not often a company can achieve year-on-year growth of 103%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Bharat Wire Ropes is growing revenues, and EBIT margins improved by 9.3 percentage points to 23%, over the last year. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Bharat Wire Ropes' future profits.

Are Bharat Wire Ropes Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Bharat Wire Ropes insiders have a significant amount of capital invested in the stock. With a whopping ₹5.1b worth of shares as a group, insiders have plenty riding on the company's success. At 22% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to Bharat Wire Ropes, with market caps between ₹8.3b and ₹33b, is around ₹15m.

Bharat Wire Ropes' CEO took home a total compensation package worth ₹11m in the year leading up to March 2023. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Bharat Wire Ropes Worth Keeping An Eye On?

Bharat Wire Ropes' earnings per share growth have been climbing higher at an appreciable rate. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so the writing on the wall tells us that Bharat Wire Ropes is worth considering carefully. What about risks? Every company has them, and we've spotted 1 warning sign for Bharat Wire Ropes you should know about.

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 tailored list of Indian companies which have demonstrated growth backed by recent insider purchases.

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.