Here's Why We Think Indowind Energy (NSE:INDOWIND) Is Well Worth Watching

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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

How Fast Is Indowind Energy Growing Its Earnings Per Share?

Indowind Energy 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. Impressively, Indowind Energy's EPS catapulted from ₹0.19 to ₹0.51, over the last year. It's a rarity to see 163% year-on-year growth like that. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Indowind Energy's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. The good news is that Indowind Energy is growing revenues, and EBIT margins improved by 9.5 percentage points to 18%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Since Indowind Energy is no giant, with a market capitalisation of ₹1.0b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Indowind Energy Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to Indowind Energy, with market caps under ₹17b is around ₹3.6m.

The CEO of Indowind Energy was paid just ₹1.5m in total compensation for the year ending March 2022. 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. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Indowind Energy Deserve A Spot On Your Watchlist?

Indowind Energy's earnings per share have been soaring, with growth rates sky high. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. Meanwhile, the very reasonable CEO pay is a great reassurance, since it points to an absence of wasteful spending habits. It will definitely require further research to be sure, but it does seem that Indowind Energy has the hallmarks of a quality business; and that would make it well worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Indowind Energy , and understanding these should be part of your investment process.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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.