Here's Why Jaiprakash Power Ventures (NSE:JPPOWER) Has Caught The Eye Of Investors

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Jaiprakash Power Ventures (NSE:JPPOWER). 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.

View our latest analysis for Jaiprakash Power Ventures

How Fast Is Jaiprakash Power Ventures Growing Its Earnings Per Share?

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It is awe-striking that Jaiprakash Power Ventures' EPS went from ₹0.077 to ₹1.49 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. This could point to the business hitting a point of inflection.

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. The good news is that Jaiprakash Power Ventures is growing revenues, and EBIT margins improved by 17.4 percentage points to 30%, over the last year. Both of which are great metrics to check off for potential growth.

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 it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Jaiprakash Power Ventures' balance sheet strength, before getting too excited.

Are Jaiprakash Power Ventures Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Jaiprakash Power Ventures insiders have a significant amount of capital invested in the stock. With a whopping ₹6.8b worth of shares as a group, insiders have plenty riding on the company's success. This would indicate that the goals of shareholders and management are one and the same.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between ₹83b and ₹266b, like Jaiprakash Power Ventures, the median CEO pay is around ₹36m.

Jaiprakash Power Ventures' CEO took home a total compensation package worth ₹32m in the year leading up to March 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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.

Should You Add Jaiprakash Power Ventures To Your Watchlist?

Jaiprakash Power Ventures' earnings per share have been soaring, with growth rates sky high. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Jaiprakash Power Ventures certainly ticks a few boxes, so we think it's probably well worth further consideration. What about risks? Every company has them, and we've spotted 1 warning sign for Jaiprakash Power Ventures you should know about.

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 tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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.