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

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 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 NHPC (NSE:NHPC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide NHPC with the means to add long-term value to shareholders.

See our latest analysis for NHPC

How Quickly Is NHPC Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. NHPC managed to grow EPS by 10% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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 NHPC is growing revenues, and EBIT margins improved by 3.1 percentage points to 48%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for NHPC?

Are NHPC Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But more importantly, company insider Vanita Shekhar spent ₹6.7m acquiring shares, doing so at an average price of ₹44.61. Purchases like this clue us in to the to the faith management has in the business' future.

Does NHPC Deserve A Spot On Your Watchlist?

One positive for NHPC is that it is growing EPS. That's nice to see. While some companies are struggling to grow EPS, NHPC seems free from that morose affliction. The cherry on top is that we have an insider buying shares. A further encouragement to keep an eye on this stock. Even so, be aware that NHPC is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

The good news is that NHPC is not the only growth stock with insider buying. Here's a list of them... 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.