Here's Why I Think Adani Ports and Special Economic Zone (NSE:ADANIPORTS) Might Deserve Your Attention Today

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Adani Ports and Special Economic Zone (NSE:ADANIPORTS). 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. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Adani Ports and Special Economic Zone

How Quickly Is Adani Ports and Special Economic Zone Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. Adani Ports and Special Economic Zone managed to grow EPS by 10% 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. Adani Ports and Special Economic Zone maintained stable EBIT margins over the last year, all while growing revenue 32% to ₹157b. That's a real positive.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Adani Ports and Special Economic Zone's forecast profits?

Are Adani Ports and Special Economic Zone 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.

Over the last 12 months Adani Ports and Special Economic Zone insiders spent ₹5.8m more buying shares than they received from selling them. On balance, that's a good sign.

It's reassuring that Adani Ports and Special Economic Zone insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. I refer to the very reasonable level of CEO pay. For companies with market capitalizations over ₹611b, like Adani Ports and Special Economic Zone, the median CEO pay is around ₹94m.

The Adani Ports and Special Economic Zone CEO received total compensation of just ₹21m 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 a culture of integrity, in a broader sense.

Does Adani Ports and Special Economic Zone Deserve A Spot On Your Watchlist?

As I already mentioned, Adani Ports and Special Economic Zone is a growing business, which is what I like to see. Like chocolate chips in vanilla ice cream, the insider buying, and modest CEO pay, make it better. If that doesn't automatically earn it a spot on your watchlist then I'd posit it warrants a closer look at the very least. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Adani Ports and Special Economic Zone (at least 1 which is a bit concerning) , and understanding these should be part of your investment process.

As a growth investor I do like to see insider buying. But Adani Ports and Special Economic Zone isn't the only one. You can see a a free list of them here.

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.