We Ran A Stock Scan For Earnings Growth And E2E Networks (NSE:E2E) Passed With Ease

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like E2E Networks (NSE:E2E). 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.

See our latest analysis for E2E Networks

E2E Networks' Improving Profits

Over the last three years, E2E Networks has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, E2E Networks' EPS shot from ₹9.91 to ₹17.30, over the last year. It's not often a company can achieve year-on-year growth of 75%. Shareholders will be hopeful that this is a sign of the company reaching an 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. The good news is that E2E Networks is growing revenues, and EBIT margins improved by 9.4 percentage points to 35%, over the last year. That's great to see, on both counts.

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.

While profitability drives the upside, prudent investors always check the balance sheet, too.

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.

Insiders both bought and sold E2E Networks shares in the last year, but the good news is they spent ₹1.5m more buying than they netted selling. At face value we can consider this a fairly encouraging sign for the company. It is also worth noting that it was Chief Revenue Officer M. Reddy who made the biggest single purchase, worth ₹5.9m, paying ₹474 per share.

On top of the insider buying, we can also see that E2E Networks insiders own a large chunk of the company. Indeed, with a collective holding of 69%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. at the current share price. That level of investment from insiders is nothing to sneeze at.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because E2E Networks' CEO, Tarun Dua, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between ₹17b and ₹67b, like E2E Networks, the median CEO pay is around ₹22m.

The CEO of E2E Networks only received ₹11m in total compensation for the year ending March 2024. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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 a culture of integrity, in a broader sense.

Is E2E Networks Worth Keeping An Eye On?

E2E Networks' earnings have taken off in quite an impressive fashion. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. 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. You should always think about risks though. Case in point, we've spotted 2 warning signs for E2E Networks you should be aware of.

The good news is that E2E Networks is not the only stock with insider buying. Here's a list of small cap, undervalued companies in IN with insider buying in the last three months!

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.