With EPS Growth And More, Sun TV Network (NSE:SUNTV) Is Interesting

By
Simply Wall St
Published
November 23, 2021
NSEI:SUNTV
Source: Shutterstock

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 completely lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In contrast to all that, I prefer to spend time on companies like Sun TV Network (NSE:SUNTV), 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 Sun TV Network

How Quickly Is Sun TV Network Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Sun TV Network managed to grow EPS by 9.6% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Sun TV Network shareholders can take confidence from the fact that EBIT margins are up from 46% to 56%, and revenue is growing. That's great to see, on both counts.

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.

earnings-and-revenue-history
NSEI:SUNTV Earnings and Revenue History November 24th 2021

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

Are Sun TV Network Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Sun TV Network insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 79%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. At the current share price, that insider holding is worth a whopping ₹166b. Now that's what I call some serious skin in the game!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Sun TV Network with market caps between ₹149b and ₹476b is about ₹44m.

The Sun TV Network CEO received total compensation of just ₹16m in the year to . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is Sun TV Network Worth Keeping An Eye On?

One important encouraging feature of Sun TV Network is that it is growing profits. The fact that EPS is growing is a genuine positive for Sun TV Network, but the pretty picture gets better than that. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Before you take the next step you should know about the 2 warning signs for Sun TV Network (1 can't be ignored!) that we have uncovered.

Although Sun TV Network certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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Simply Wall St

Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.