Here's Why We Think Jindal Steel & Power (NSE:JINDALSTEL) Is Well Worth Watching

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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Jindal Steel & Power (NSE:JINDALSTEL). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Jindal Steel & Power

How Fast Is Jindal Steel & Power Growing Its Earnings Per Share?

In the last three years Jindal Steel & Power's 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. As a result, we'll zoom in on growth over the last year, instead. Jindal Steel & Power's EPS shot up from ₹51.69 to ₹80.92; a result that's bound to keep shareholders happy. That's a commendable gain of 57%.

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. Jindal Steel & Power maintained stable EBIT margins over the last year, all while growing revenue 31% to ₹511b. That's progress.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Jindal Steel & Power's forecast profits?

Are Jindal Steel & Power Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own Jindal Steel & Power shares worth a considerable sum. Notably, they have an enviable stake in the company, worth ₹10.0b. 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. 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 Jindal Steel & Power, with market caps between ₹156b and ₹501b, is around ₹48m.

The Jindal Steel & Power CEO received ₹34m in compensation for the year ending March 2021. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is Jindal Steel & Power Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Jindal Steel & Power's strong EPS growth. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. The overarching message here is that Jindal Steel & Power has underlying strengths that make it worth a look at. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Jindal Steel & Power (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

Although Jindal Steel & Power certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.