With EPS Growth And More, TAC Infosec (NSE:TAC) Makes An Interesting Case

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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like TAC Infosec (NSE:TAC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide TAC Infosec with the means to add long-term value to shareholders.

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TAC Infosec's Improving Profits

Over the last three years, TAC Infosec 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. So it would be better to isolate the growth rate over the last year for our analysis. TAC Infosec's EPS skyrocketed from ₹7.45 to ₹10.43, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 40%.

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. While we note TAC Infosec achieved similar EBIT margins to last year, revenue grew by a solid 75% to ₹189m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Check out our latest analysis for TAC Infosec

Since TAC Infosec is no giant, with a market capitalisation of ₹12b, you should definitely check its cash and debt before getting too excited about its prospects.

Are TAC Infosec Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that TAC Infosec insiders own a meaningful share of the business. To be exact, company insiders hold 73% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. With that sort of holding, insiders have about ₹8.8b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like TAC Infosec with market caps under ₹17b is about ₹3.6m.

The CEO of TAC Infosec was paid just ₹960k in total compensation for the year ending March 2024. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is TAC Infosec Worth Keeping An Eye On?

You can't deny that TAC Infosec has grown its earnings per share at a very impressive rate. That's attractive. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. This may only be a fast rundown, but the key takeaway is that TAC Infosec is worth keeping an eye on. You should always think about risks though. Case in point, we've spotted 2 warning signs for TAC Infosec you should be aware of, and 1 of them is a bit concerning.

Although TAC Infosec certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.