Here's Why We Think Power Grid Corporation of India (NSE:POWERGRID) 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. 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.

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 Power Grid Corporation of India (NSE:POWERGRID). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Power Grid Corporation of India with the means to add long-term value to shareholders.

Check out our latest analysis for Power Grid Corporation of India

Power Grid Corporation of India's Earnings Per Share Are Growing

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. Power Grid Corporation of India managed to grow EPS by 13% 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. Power Grid Corporation of India maintained stable EBIT margins over the last year, all while growing revenue 8.1% to ₹457b. That's progress.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Power Grid Corporation of India's future EPS 100% free.

Are Power Grid Corporation of India Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalisations over ₹666b, like Power Grid Corporation of India, the median CEO pay is around ₹103m.

The CEO of Power Grid Corporation of India only received ₹10m in total compensation for the year ending March 2023. That looks like a modest pay packet, 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 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.

Does Power Grid Corporation of India Deserve A Spot On Your Watchlist?

One positive for Power Grid Corporation of India is that it is growing EPS. That's nice to see. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. All things considered, Power Grid Corporation of India is definitely worth taking a deeper dive into. We don't want to rain on the parade too much, but we did also find 2 warning signs for Power Grid Corporation of India (1 doesn't sit too well with us!) that you need to be mindful of.

Although Power Grid Corporation of India certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.