Do Hathway Cable and Datacom's (NSE:HATHWAY) Earnings Warrant Your Attention?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Hathway Cable and Datacom (NSE:HATHWAY), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Hathway Cable and Datacom

Hathway Cable and Datacom's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Like a wedge-tailed eagle on the wind, Hathway Cable and Datacom's EPS soared from ₹1.04 to ₹1.33, in just one year. That's a commendable gain of 27%.

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. Hathway Cable and Datacom reported flat revenue and EBIT margins over the last year. That's not bad, but it doesn't point to ongoing future growth, either.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Hathway Cable and Datacom's balance sheet strength, before getting too excited.

Are Hathway Cable and Datacom 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, small purchases are not always indicative of conviction, and insiders don't always get it right.

In the last twelve months Hathway Cable and Datacom insiders spent ₹578k on stock; good news for shareholders. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling.

The good news, alongside the insider buying, for Hathway Cable and Datacom bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping ₹6.4b worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 14% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Is Hathway Cable and Datacom Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Hathway Cable and Datacom's strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. Of course, just because Hathway Cable and Datacom is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Hathway Cable and Datacom, you'll probably love this free list of growing companies that insiders are buying.

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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