If You Like EPS Growth Then Check Out Hi-Tech Pipes (NSE:HITECH) 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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In contrast to all that, I prefer to spend time on companies like Hi-Tech Pipes (NSE:HITECH), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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 Hi-Tech Pipes

How Fast Is Hi-Tech Pipes Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Hi-Tech Pipes grew its EPS by 8.1% per year. That's a good rate of growth, if it can be sustained.

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. Hi-Tech Pipes maintained stable EBIT margins over the last year, all while growing revenue 34% to ₹17b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Since Hi-Tech Pipes is no giant, with a market capitalization of ₹6.8b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Hi-Tech Pipes Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Despite -₹18m worth of sales, Hi-Tech Pipes insiders have overwhelmingly been buying the stock, spending ₹35m on purchases in the last twelve months. On balance, to me, this signals their optimism. Zooming in, we can see that the biggest insider purchase was by Chairman & MD Ajay Bansal for ₹18m worth of shares, at about ₹123 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Hi-Tech Pipes insiders own more than a third of the company. In fact, they own 57% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about ₹3.9b riding on the stock, at current prices. That's nothing to sneeze at!

Is Hi-Tech Pipes Worth Keeping An Eye On?

One important encouraging feature of Hi-Tech Pipes is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. However, before you get too excited we've discovered 3 warning signs for Hi-Tech Pipes (1 is potentially serious!) that you should be aware of.

As a growth investor I do like to see insider buying. But Hi-Tech Pipes 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.