Is Now The Time To Put E2E Networks (NSE:E2E) On Your Watchlist?

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 E2E Networks (NSE:E2E). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for E2E Networks

E2E Networks' Improving Profits

E2E Networks has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, E2E Networks' EPS grew from ₹2.61 to ₹6.51, over the previous 12 months. Year on year growth of 149% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

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. E2E Networks shareholders can take confidence from the fact that EBIT margins are up from 7.4% to 18%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

E2E Networks isn't a huge company, given its market capitalisation of ₹2.5b. That makes it extra important to check on its balance sheet strength.

Are E2E Networks Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's nice to see that there have been no reports of any insiders selling shares in E2E Networks in the previous 12 months. So it's definitely nice that Chief Revenue Officer M. Reddy bought ₹2.1m worth of shares at an average price of around ₹167. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

On top of the insider buying, we can also see that E2E Networks insiders own a large chunk of the company. In fact, they own 58% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. To give you an idea, the value of insiders' holdings in the business are valued at ₹1.4b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Is E2E Networks Worth Keeping An Eye On?

E2E Networks' earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe E2E Networks deserves timely attention. We don't want to rain on the parade too much, but we did also find 2 warning signs for E2E Networks that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of E2E Networks, 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.

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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.